Truck and Barter

There has been a lot of political and ideological discussions surrounding Katrina. Clearly the political sector handled the disaster with great inefficiency. Yet many people, including (as usual) most of the media, seem to believe government failure somehow proves we need bigger government.

This is an odd conclusion. If the voluntarily sectors (market and civil society) fail we hardly conclude that government must shrink. To put it another way, if Katrina had been handled with great efficiency by the state the same people would conclude this was an argument for even stronger government. But now the exact opposite is also taken as meaning we need greater government. I am curious to know if there is any world development the NYT does not see as evidence for expanding the welfare state, at the expense of individuals and of the civil society.

Some goverment failures are obvious. Incorrect calculations when building protection, public services and policing breaking down when we needed them the most and mismanagement of disaster help.

What we also had to mention Alert-Inflation. There are asymmetries for politicians when it comes to warnings against potential disasters. If something happens they will be blamed for under-reaction, whereas the costs of overreaction are comparatively small (perhaps you are just seen as signaling concern for citizens).

This would lead to exaggerated warnings against storms, hurricanes and the like. But the public has rational expectations, and will learn to devaluate the warnings. The public choice version of Crying Wolf is due to the inherent ineffectiveness of the political sector. If goverment was truly welfare maximizing (rather than say vote maximizing) politicians would not exaggerate in order to save themselves again low probability disasters. Therefore the public would not learn to devaluate warnings.

Needless to say, Katrina made things worse. It is safe bet that we will have several years of costly over-reactions in front of us. If anything the problem will become worse, as the public after a while will learn to ignore the warmings even more.