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 10: Earth, Wind, and Fire! Federalism and Incentive in Natural Disaster Response

Emily C. Schaeffer and Andrew Kashdan

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


1 Emily C. Schaeffer and Andrew Kashdan INTRODUCTION 10.1 Conventional wisdom holds that the failed government response in the aftermath of Hurricane Katrina stemmed from a lack of leadership, direction and overall mismanagement at the federal and state levels. Nevertheless, there does not seem to be a decline in popular support for the existence of a federal disaster response agency.2 Public perception suggests that the Federal Emergency Management Agency’s (FEMA) poor response to Hurricane Katrina was a fluke, and that generally it is wise to entrust these tasks to an overarching federal agency. While recent disaster response failures may be attributable to federal agencies, the public may be pointing the finger for the wrong reasons. The argument favoring federal oversight of disaster response rests on the presumed ability of a federal agency to amass resources and overcome externality problems. Implicitly, the public appears to be willing to trade off the benefits of local knowledge and semi-private, diffuse response in favor of the enhanced capacity of a federal agency to mobilize resources and solve large-scale coordination problems. Framing the trade-off in this way is reasonable if we assume that cities do not have the capacity to respond effectively when disaster strikes. History, however, presents a challenge to this assumption and the trade-off it implies. Before the mid-1900s the United States had no permanent public disaster recovery structure in place at the federal level. Large-scale disasters (and the recoveries that followed) that predate the centralized structure raise the question of whether the...

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