The Political Economy of Hurricane Katrina and Community Rebound

The Political Economy of Hurricane Katrina and Community Rebound

New Thinking in Political Economy series

Edited by Emily Chamlee-Wright and Virgil Henry Storr

In 2005 Hurricane Katrina posed an unprecedented set of challenges to formal and informal systems of disaster response and recovery. Informed by the Virginia School of Political Economy, the contributors to this study critically examine the public policy environment that led to both successes and failures in the post-Katrina disaster response and long-term recovery. Building from this perspective, this book lends critical insight into the nature of the social coordination problems disasters present, the potential for public policy to play a positive role, and the inherent limitations policymakers face in overcoming the myriad challenges that are a product of catastrophic disaster.

Chapter 3: The Use of Knowledge in Natural Disaster Relief Management

Russell S. Sobel and Peter T. Leeson

Subjects: economics and finance, austrian economics, public choice theory, public sector economics, environment, disasters, politics and public policy, public choice


1 Russell S. Sobel and Peter T. Leeson2 More than 60 years ago F.A. Hayek identified the problem of social coordination in his seminal article ‘The use of knowledge in society’: The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances 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. The economic problem of society is thus not merely a problem of how to allocate ‘given’ resources – if ‘given’ is taken to mean given to a single mind which deliberately solves the problem set by these ‘data.’ It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only those individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge not given to anyone in its totality. (Hayek 1945, pp. 519–20) Hayek’s critical insight, later called ‘the knowledge problem’, highlighted two central features of social organization. First, every society confronts a ‘division of knowledge’ analogous in many respects to the ‘division of labor’. Information is fragmented, diverse and often contained in inarticulate forms, held separately and locally by the many individuals who compose society. Second, the foremost obstacle that every effort at social coordination must overcome is somehow tapping into this dispersed...

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