Hurricane Katrina taught us decentralised rebuilding is effective

Many US communities have been devastated by Hurricanes Harvey and Irma. With natural disasters seemingly increasing in frequency and intensity, societies everywhere need to draw definitive lessons on disaster relief from their experiences in dealing with them.

Last week’s article looked at the Chicago fire of 1871; this week, we examine what lessons policymakers can learn from the response to Hurricane Katrina, which struck New Orleans in 2005.

This was a research lead by Peter Boettke at the Mercatus Centre at George Mason University. Boettke and a team of scholars spent considerable amounts of time in Louisiana operating as hybrid economists/anthropologists, documenting what did and did not work, and synthesizing their findings into valuable scholarly contributions.

One of those findings was a book by Virgil Storr, Stefanie Haeffele-Balch and Laura Grube, entitled Community revival in the wake of disaster. The 19th century English philosopher, John Stuart Mill, offers a useful prologue: “What has so often excited wonder, the great rapidity with which countries recover from a state of devastation; the disappearance, in a short time, of all traces of the mischiefs done by earthquakes, floods, hurricanes and the ravages of war… in a few years after, everything is much as it was before.”

Mill was writing at a time when there were no governments charged with co-ordinating disaster relief, such as the Federal Emergency Management Agency (Fema). His observation should cast doubt on the mainstream view that central governments are the only vehicle capable of organising effective disaster relief. Storr, Haeffele-Balch and Grube’s investigation into Katrina confirmed the pivotal role played by bottom-up recovery effects, and highlighted some of the problems with centralisation.

It is worth understanding the pros and cons of centralisation in general. Broadly speaking, the key advantage of managing things centrally is economies of scale: when activity is organised at a larger scale, there can be huge efficiency gains. For example, anti-global warming efforts are highly inefficient and possibly even futile at the local governmental level, requiring a national scale for effectiveness.

However, Centralising has several downsides. First, central management creates information bottlenecks, whereby important, local information does not reach the bureaucrats stuck applying a one-size-fits-all policy. Second, de-centralised management involves key stakeholders in the decision-making process, increasing the likelihood that their interests are accounted for, and diminishing the likelihood of corruption. That is why issues such as local pollution and certain types of law enforcement are best organised at the municipal rather than national level.

An important theme in the Community Revival book is that while natural disasters are associated with an amplified need to exploit economies of scale, they are also characterised by an even stronger need to exploit local knowledge.

A key post-disaster challenge is the “co-ordination problem” faced by evacuating residents: the baker wants to return, but only if there are enough customers; the teachers want to return, but only if there are enough students; and so on.

Monoliths such as Fema are poorly placed to solve this problem, since they have no preexisting relationships with the people involved; and they are poorly positioned to assess people’s interests, and to coordinate the decision to move back and rebuild.

Moreover, they have comparatively little background knowledge on the area, so when things change quickly – which often happens in a disaster – their information deficit puts them at a massive disadvantage compared to locals when it comes to responding. This reflects a deeper problem

Local commercial and social entrepreneurs were instrumental in assessing people’s needs

with bureaucrats: they are programmed to systematise, and are inherently anti-dynamic and unresponsive to rapidly evolving scenarios.

In contrast, local commercial and social entrepreneurs were instrumental in assessing people’s interests accurately, in allocating resources to where they were most needed, and in co-ordinating people’s actions to maximise their effectiveness.

School principals, church leaders and local business leaders in New Orleans became entrepreneurs and led the way in organising the relief and rebuilding effort, making sure that the evacuees could quickly come back, and find something resembling a normal economy waiting for them.

In light of the research produced by the Mercatus Centre and others, Fema’s performance has improved post-Katrina. However, there remains a fundamental underappreciation among policymakers and the general public of the role of local entrepreneurs. That is why during every natural disaster, we must reread Mill’s quote and remember what the world looked like when he wrote it.