Monday, September 05, 2005

The Commanding Heights

I just picked up The Commanding Heights, and have been enjoying it greatly. It discusses how the destruction from WWI and bitter aftermath (with the Great Depression in the 30s) dramatically made the case for massive governmental expansion and intervention in markets, and how the new era of liberalism, born at the University of Chicago, took hold and now competes with socialist, centrally planned models. It is an excellent book, and I will write more about it soon.

It's also interesting to consider the arguments for centralized control with this reasonable account of "Liberals vs Conservatives" over at Angry Bear. Kash argues that Liberals believe that bad luck happens and that it is correct (and efficient) that governments step in and help in those situations, whereas Conservatives beleive that individuals should bear risk and responsibility individually. I would phrase the Conservative position as "people respond to incentives" and the line between helping people from misfortune and subsidizing (and therefore increasing) bad decisions is narrow.

The devestation from Hurricane Katrina is a mixture of appallingly bad luck and bad decision making. Marginal Revolution outlines the possibilities here
1. They were plain, flat out stupid.

2. They were not stupid per se, but human beings underestimate the potential for small probability, massive disruptions to their accustomed status quo.

3. They made a rational calculation, but just happened to catch the wrong number on the roulette wheel of nature.

4. Bad policy meant they didn't have many good options for leaving.

Sadly, #4 seems to have played a role:

"As many as 100,000 inner-city residents didn't have the means to leave, and an untold number of tourists were stranded by the closing of the airport. The city arranged buses to take people to 10 last-resort shelters, including the Superdome." (link here).
And here we are simply talking about people's decision to stay or leave, not investment in levies (which are discussed here). I am pleased to see serious relief efforts finally getting underway, but also believe that five years from now, New Orleans will be rebuilt, repopulated, and with levies that will not withstand a category 5 hurricane.


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