- Walmart had a market-based incentive to help customers and communities get back on their feet after Katrina
- Localizing disaster aid will result in more lives saved, less property lost and fewer taxpayer dollars spent
- The preference for ‘local first, national second’ can be found in the legislation authorizing FEMA
A superstorm requires supersmart government. But making wise decisions from a distance is hard. Economists call this the problem of local knowledge. The information needed for making rational plans is distributed among many actors, and it is extremely difficult for a far-off, centralized authority to access it. The devil really is in the details. (This is why the price system, which aggregates all that dispersed insight, is more economically efficient than a command-and-control system.)
So emergency and disaster response should be, as much as possible, pushed down to the state and local level. A national effort should be reserved for truly catastrophic events. Indeed this preference for "local first, national second" can be found in the legislation authorizing the Federal Emergency Management Agency.
The number of federal emergencies has soared, stretching capabilities. Increasingly state and private resources are overlooked.
But just the opposite has been happening in recent decades. There were, according to a Heritage Foundation analysis, 28 FEMA declarations a year during the Reagan administration, 44 during Bush I, 90 during Clinton, 130 during Bush II, and 153 so far during Obama's term. The result is federal emergency response effort stretched thin in its capabilities to deal with major disasters.
And those local actors shouldn’t just be local government officials. The private sector has a role to play, as well. Wal-Mart’s invaluable relief work after Hurricane Katrina is the forgotten bright spot of that disaster.
In his 2008 paper, “Wal-Mart to the Rescue: Private Enterprise’s Response to Hurricane Katrina,” Professor Steven Horwitz of St. Lawrence University points out that “Wal-Mart and other ‘big box’ retailers such as Home Depot ... responded with speed and effectiveness, often times despite attempts by government relief workers to stymie it, and in the process saved numerous lives and prevented more looting and chaos than actually took place.” As the Jefferson Parish sheriff, Harry Lee, said on "Meet the Press" back then, “If American government would have responded like Wal-Mart has responded, we wouldn’t be in this crisis.”
In addition to local knowledge, Professor Horwitz points to several other Wal-Mart advantages. It had a market-based incentive to help its customers and communities get quickly get back on their feet. And years of competing with other retailers made its decision-making process nimble and decentralized, just what you want in natural disaster where the situation is constantly evolving.
The government should give these private companies protection from civil liability and incorporate them into planning so their efforts aren't turned away (as in Katrina) by uninformed officials
To modify an ancient Chinese saying, “The flood waters are high, and Washington is far away.” Localizing disaster aid, both public and private, will result in more lives saved, less property lost and fewer taxpayer dollars spent.
James Pethokoukis is a columnist at AEIdeas, the blog of the American Enterprise Institute, and a CNBC contributor.