Extract

1 Steven Horwitz INTRODUCTION 4.1 Many people believe that the government, particularly the federal government, should finance and direct both the response to and recovery from natural disasters. Such centralized political solutions have, after all, been the standard practice in recent US history. This belief often rests on the assumption that the private sector’s profit motive would thwart the charitable impulses generally regarded as essential for effective relief. However, the private sector’s involvement in the response to Hurricane Katrina along the Gulf Coast has provided strong reasons to be skeptical of this argument. The dramatic failures of the Federal Emergency Management Agency (FEMA) during Hurricane Katrina have been well publicized and thoroughly dissected by the political process.2 Both critics and supporters of vigorous government responses to natural disasters have noted those failures and offered analyses of the reasons behind them (Burby 2006; Sobel and Leeson 2006). These discussions and analyses have led to some fairly minor changes in FEMA’s structure and operations for future crises.3 Despite FEMA’s massive failures, the debate to this point has been focused largely on improving the government’s response to future disasters and catastrophes. Policy makers and the public alike continue to assume that government must be responsible for nearly all disaster recovery activities. However, the reality of the response to Katrina demonstrates that the private sector is far more effective than the conventional wisdom suggests.4 Media accounts during the relief and recovery process and reports from local residents and private sector actors make it clear...