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09/04/2005

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Congresswoman Shirley Chisholm

One of the great gaps in your commentary, Professor Posner, concerns the nature of the lives of the people most affected by Katrina and the need to think seriously of the socioeconomic ADVANCEMENT (rather than only about the bottom-line survival and relocation) of those people.

With social welfare systems already under attack or, in some respects, phased out in states like Texas where poor rural and urban black Americans (to say nothing of other socioeconomically disadvantaged people) are likely to be relocated, what areas and what officials will ensure that the displaced receive more than the barest minimum of resources so that they return to a standard of living where they are trying to get by on two-fifths of nothing; where they endure the cycle of debt and disadvantage borne of low-wage jobs; where the stain of low-wage jobs is compounded by substandard educational and environmental resources; where these resources are further compounded by legacies of Southern ethnic and racial discrimination in rural and urban redistricting and entrenched sociopolitical bias.

It can never only be a matter of cost-benefits. Your rhetoric dangerously backgrounds challenging ethical ramafications.

Certainly, it may be best not to rebuild New Orleans. Likewise, we need discussion on the viability of such a task.

However, in my mind, an equally more pressing concern involves the way that we might use the sad opportunity of Katrina to assist those poor, rural African Americans who were most disadvantaged by this tragedy to obtain a standard of life that has been denied them by so many entrenched, entangled, and under-analyzed factors.

Who will begin to concretely plan for these people's welfare in ways that go beyond just surviving and being "relocated" into yet another poor, marginalized existence?

Wes

The cost of rebuilding is far too great.Actually, for the $200 billion cost (so far) of the Bush administration's charity project that is attempting to impose "democracy" on Iraq it would be possible to give the 500,000 residents of New Orleans $400,000 each. If the USA has the resources for such charity to Iraq then any reluctance to spend money on New Orleans is clearly due to a desire to teach the people of New Orleans a nasty lesson rather than due to a lack of resources on the part of the USA. Then again, a nasty lesson is what Becker and Posner think New Orleans needs.

Gabriel Mihalache

By this logic, the US administration ought to do cost/benefit analysis for each city every year (let's say) and then forcefully relocate any city that proves a liability. Let's start by relocating New York to Ohio because it's too close to the ocean.
Also...

The decision to abandon or not cannot be left to the market.

In other words the decision shouldn't be left to those concerned... and I thought that forced relocation was a speciality of Soviet Russia!

While legal ways can always be found (i.e. there are always dubious laws to be abused), stripping citizens of their full property rights seems like a very bad idea to me.

If one still insist on doing something like this, I imagine that a network effect started by (voluntary) business relocation might reduce the city in size considerably.

Chris

"By this logic, the US administration ought to do cost/benefit analysis for each city every year (let's say) and then forcefully relocate any city that proves a liability. Let's start by relocating New York to Ohio because it's too close to the ocean."

This isn't so, and a lecture that occurs in about the first month of Econ 101 tells us why. In economics, there is a concept called "sunk costs", which are those costs that once incurred cannot be recovered. What economics teaches us is that these costs are irrelevant to future decision making.

Now, what this means is that the relevant question has nothing to do with "relocating New York". The costs in building it have already been incurred and are irrecoverable, so the relevant question for New York is "Do the benefits of contiuing to live here exceed the costs of continuing to do so?" But for New Orleans, the new question is "Do the benefits of living here exceed the costs of building a new city from scratch?"

So there is no contradiction whatsoever in saying that New Orleans shouldn't be rebuilt but New York shouldn't be moved. In fact, one could perfectly reasonably say it was optimal to live in New Orleans until it was destroyed, but now rebuilding is wrong. Apologies for the longish post on what is no doubt an obvious topic to most Becker-Posner readers, but that really is a fairly fundamental error.

Thomas

Posner's absolutely correct that we should be careful not to let nostalgic or emotional factors become conclusive here. But I think he underscores the benefits to rebuilding all the same.

Strategic Forecasting had an article on the importance of the port just before the storm fully hit:
http://www.informationclearinghouse.info/article10019.htm

The value of a port (the fifth largest in the world) that connects basically all our navigable rivers to the ocean is unfathomable. It profoundly effects our ability to distribute national production of goods intended for international market. Its effects on agriculture alone are immense.

If rebuilding is necessary, perhaps as consolation, the scale of the rebuilding effort will likely allow us to construct "target hardening" infrastructure at a bargain. Some suggest multiple dry levees cutting through the city that would serve to compartmentalize future flooding disasters. Is such preventive infrastructure sustainable, or are the markets/politics of risk too unreliable here?

I realize the discussion was simplified out of necessity. But I think planning to rebuild in a constrained capacity would add an interesting element to the discussion. Is rebuilding only so far as necessary to support the national strategic infrastructure even possible? Does the functional aspect of the port inevitably induce the rest of the city to expand to support it?

Alex Robbins

I wonder what Congresswoman Chrisholm would think about the thesis that implicit societal racism is what has allowed majority-black neighborhoods to slip into ethnically Balkanized, gerrymandered, one-party rule neighborhoods, with corrupt police forces, incompetent local officials, and a population largely dependant on largess from the government for day-to-day survival.

Certainly the catastrophic failure of the federal government to deal with the immediate aftermath of Katrina is tragically mind-boggling. But let's not forget about the sad decline of New Orleans over the last few decades, as a once great black metropolis sunk into fetid disrepair, and the nation gave a collective shrug so long as the French Quarter and Garden District were still accessible to white tourists.

PaperChaser

I agree with the cost benefit analysis posed by Judge Posner, however, I feel that it should also include the emotional reactions of the people who would be moved. Judge Posner suggests that the only cost moving all these people would be building more residential and commercial structures in other cities. But what cities would these people go to, what if they donít want to move to different cities, what about the separation of large families and close friends who end up in different places. Personally, if I had a choice of moving to another city or having my city rebuilt I would not loose too much sleep over the decision. Iím not suggesting that the analysis should be avoided and the city should be rebuilt blindly, but I believe that the emotional factor should be included in the analysis because I doubt that a depressed and unsatisfied worker is worth $7 million.

Muckraker

According to Posner, "all elected officials except the President and Vice President have geographically circumscribed constituencies and naturally resist efforts to devote proportionately more resources to defensive measures that would benefit only outsiders."

Two points here. First, the Pres and VP do have "geographically circumscribed interests." Everyone by now is familiar with the red/blue map. Bush and Cheney get very few votes from many cities, like San Francisco, Los Angeles, New York, and New Orleans. They couldn't give a lick for those cities, and federal aid does not flow to them as a result. The small proportion of anti-terrorism money flowing to cities, despite the fact that they are the most likely targets and have dense populations to protect, is appalling.

Second, unfortunately, Congress seems to view anti-terrorism spending yet another pork-barrel project. But if we had responsible elected officials, they would want the money to go towards the real threats. I think that residents of Peoria would understand that Los Angeles faces a greater threat and has a greater, denser populuation, and thus deserves a larger share of the funding. If only their elected officials would be honest enough to explain this too them. Unfortunately, the majority party in America gets votes by scaring the residents of Peoria (or places like it) to death, well beyond the point of reason, about terrorism. If it scares them, it can't tell them that they don't need the funding.

glamis

In response to Thomas, tangible assets are also used in determining net worth, such as equity in a house, car, etc. So yeah, youre wrong.

sam

Wes -

Your logic seems to resemble that of John Kerry during the last presidential election: Any money spent in or on Iraq is money that could be spent in the US and therefore (here is the non sequitor) that money should be spent in the US -- not in Iraq.

Of course your logic pre-supposes that money spent in and on Iraq is not done so in the interest of Americans, i.e., Americans will not benefit from those expenditures; those expenditures, as far as Americans are concerned, are wasted funds. (It also, for that matter, pre-supposes that the government is only justified in spending on projects directly and obviously beneficial to Americans.)

At least at this point in time the first of your assumptions is a very difficult position to prove, regardless of how you feel about our involvement in Iraq. (Now I would expect the germaine but myopic response involving "There were no WMDs; Saddam wasn't involved in terrorism against the US; etc." -- the myopia is the refusal to consider, quite simply, the benefits of . . . success.)

None of this is to be overly optimistic about Iraq. I am quite pessimistic about the whole thing. Though, in truth, I think the current difficulties indicate more about the inadequacies of the Muslim world than about those of America.

N.E.Hatfield

Having lived near the Gulf Coast and survived two hurricanes, I know what these people are going through and it ain't pretty. Unfortunately, I am going to end up sounding callous. But the fact of the matter is, everyone who has ever lived in the region has known for at least 150 years that if a levee ever breaks, everyone will have to SWIM FOR IT! The Levee finally broke. So what's so surprising about the disaster? As for response, given the magnitude, it has been timely and adequate. It's time get to work, clean up the mess and rebuild. The speechifying is just a waste of time and energy that could be put to better uses.

Speaker Hastert may be right, it's really time to move the City to high ground. But only a rational Cost-Benefit analysis will point in the proper direction. To rebuild, is only to invite disaster once again. As children we all learned, if a storm comes in off the Gulf, head for the High Ground.

MikeTheBear

This is a good topic and I commend our blog hosts for having the intestinal fortitude (i.e., ìgutsî) to raise an issue which would otherwise be considered ìpolitically incorrect.î My only question is to what extent people actually rely on help from Good Samaritans to essentially insure them from the effects of a disaster. I can only speak from personal experience, and notwithstanding the outpouring of assistance after both Katrina and the tsunamis I tend to be a bit cynical, but I do not take Good Samaritans into account AT ALL when making personal decisions. I think Dr. Beckerís example of the parent-child relationship overstates reality a bit simply because the parent-child relationship has an emotional bond not present among strangers. Iím not saying that the Good Samaritan paradox plays no role in decision-making, I just donít think it plays that significant a role.

I feel that irrational thinking places a bigger role here. For instance, too many people do not understand the concept of sunk costs, no pun intended. While I feel that a rigorous analysis of the costs and benefits of abandoning a disaster-prone area is very rational, many people would say thatís just crazy talk. After all, look how much money has already been invested in the area ñ you canít just throw that away. And so, good money gets thrown after bad. There is also the problem of a misunderstanding of statistics. The reasoning here is that a particular area has just suffered a major disaster ñ what are the ìoddsî that another disaster will happen in the near future? This is like saying I just flipped a coin ten times and they all came up heads. What are the odds that the 11th flip will come up heads? Assuming the coin is fair, itís 50%. Itís ALWAYS 50%.

I think the government is partly responsible for businesses relocating in disaster-prone areas if they offer tax breaks and other incentives.

Finally, and at the risk of opening a can of worms, I think religious beliefs are to some extent responsible for people locating in disaster-prone areas. The idea here is that as long as people pray and observe other rituals of their religion, they will be kept safe from harm. Iím not implying that all religious people share this idea; most religious people are quite rational and understand that they need to help themselves first before asking for Divine Intervention. But I think it is a factor to consider.

Wes

...the cost to rebuild your city is down to a mere $200,000 per capita.So a family a five (two parents, three children) would be living in a house where the building alone cost a million dollars?A poor but decent house could be built for $50,000 leading to a per capita cost of $10,000 or 5 billion for all 500,000 residents. That's a mere 2.5% of the cost of the Iraq war to date.

H. Blur

"This isn't so, and a lecture that occurs in about the first month of Econ 101 tells us why. In economics, there is a concept called "sunk costs", which are those costs that once incurred cannot be recovered. What economics teaches us is that these costs are irrelevant to future decision making."


Chris,


Apologies to you for what I thought about your comment when I finished reading it.

The reason why I agree with Gabriel Mihalache is precisely the reason why you are wrong in rebutting his argument.

Richard Posner's basic cost/benefit position is the following.
"To decide whether to rebuild or abandon the City, the cost of reconstruction, plus the expected cost of a future such disaster, should be compared to the cost of either building a new city or, what would be cheaper and faster, simply relocating the present inhabitants to existing cities, towns, etc., a solution that would require merely the construction of some additional commercial and residential facilities, plus some additional infrastructure."

Under this rationale, it is thus fair to surmise the possibility that NY could actually be viewed as not efficiently situated (blizzards, terrorist attacks probability increased due to coast, etc.).

Your sunk cost approach can only give rise to sympathetic smiles from economists (even 101 ones), as it can only be viewed as an incomplete and thus incorrect analysis. Your "sunk cost" approach got you blind to all the other factors that even Mr. Posner stated had to be taken into account, eg comparisons on anti-terrorism costs (Ohio boasts no coast), insurance costs, etc.

In other words: you're not looking at the big picture, here.

But of course, you may be right. At the end of the day, the sunk costs might be so high in certain situations that it would be just ridiculous (sorry, not ridiculous, as this words is not "efficient vocabulary"- "cost challenging" is better, that way everyone will take me seriously, right...) to relocate some cities. However, I am pretty sure that you never made such cost analysis (NY city relocating costs v. sunk costs) before you actually posted your comment.

Chris

I don't mean to belabor the point, but this really isn't complicated, and while I didn't actually sit down and calculate the costs and benefits, I'm rather perplexed that someone who seems to know a good deal of economics finds this the least bit confusing.

Of course NY could be viewed as "not efficiently situated". But the point is that the event of it *already* existing changes the equation, rather dramatically. There is an "implied" income flowing from the buildings to the residents that has to be considered.

If you'll read carefully, you'll see that my post is completely agnostic as to both whether New Orelans should be rebuilt and to whether New York should be moved. I took, and take, a position on neither. All I was pointing out was that the logic of having an argument over whether to rebuild does not naturally extend to an argument over whether to forcibily relocate, unless there are VERY extensive costs to the current location.

In other words, all (and seriously, this is the only thing my post said) I am saying is that the decision on August 1 of "Should we move New Orelans?" is different from the decision on September 6 "Should we rebuild New Orleans?" If you misread that somehow, I apologize for the lack of clarity. But really, I fail to see how anyone could disagree with that.

Wes

...your logic pre-supposes that money spent in and on Iraq is not done so in the interest of Americans, i.e., Americans will not benefit from those expenditures...At least at this point in time the first of your assumptions is a very difficult position to prove...I fail to see how "at this point in time" Americans are benefitting from the war in Iraq.As to the future, there might be two possible benefits to Americans: decrease in terrorism and access to oilThe long term outcomes where terrorism increases as a result of the Iraq war are just as likely as the outcomes where terrorism decreases (no one really has any idea one way or the other) so that leaves oil.As far as I'm concerned, any money America spends on the oil problem should be going to alternative energy research (even if it is just methods for extracting oil from other sources such as tar sands or coal). Even the NIH budget is only about 30 billion so the hundreds of billions the USA is spending on Iraq would have a truly dramatic impact if they were instead spent on research. As far as I'm concerned neither spending on Iraq or spending on New Orleans is the best way to solve Americans' oil problem.On the other hand, if there is some compelling reason that the USA needs to continue its long term reliance on foreign oil then Americans benefit from rebuilding both Iraq and New Orleans because both are important with respect to the USA's access to foreign oil so there shouldn't be any complaints about either.It should be noted that, while the war in Iraq is a lot like WWI in that no one really know why they're fighting, the Bush administration's main justification for it is charity which applies just as much to rebuilding New Orleans as Iraq (probably more so since New Orleans is actually part of the USA).

John Kelsey

I suspect one part of the cost/benefit analysis that's hard to get right is the value of the existing arrangements between people--jobs, neighborhoods, schools, etc.--which may reasonably come back together in some form if the city is rebuilt. I don't know how you put a value on this, but there clearly is a value.

L Walker

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Amsouth Bank www.amsouth.com Harold Rhodes, from Washington State now in Birmingham, Alabama Said, "The responsibility Lies with the mayor, Not the Government. The Federal Government is not responsible for these people."

Time said 9/06/05 Wednesday.
Harold Rhodes, Supervisor AmSouth
1-800-289-6720 ex. 7964

Voice your Opinion to AmSouth Corp at 1-800-Amsouth!!!

rich

This may be too basic for the topic but . . .

In areas subject to storm flooding, require that storm proof escape hatches be installed in the roofs of existing and new residential housing. (This would have saved lives.)

Locate, with an adequate margin of error, emergency headquarters above projected flood levels. Provide on site fuel for the headquarters and associated communication facilities. (N.O. was flooded out. Emergency communications were powered by City natural gas utilities.)

When a mandatory evacuation is ordered, require that the families of emergency personnel evacuate, and pay them for their expenses. (This may have kept more emergency personnell on site because emergency personnel would not need to protect their families.)

Have an independent sub-evacuation plan for hospitals and nursing homes, with a medical person responsible for ensuring it works. Include outpatient, chronic care persons in the plan. (Doctors may be able to get more done than bureaucrats if they know it is required.)

Train and request persons seeking disaster assistance at designated locations to self organize. Use persons with prior military or police service. This could extend to caring for others, cleaning premises where they are located, sanitation discipline when sanitary facilities are unavailable or overwhelmed, getting basic information such as person counts, lists of names and addresses, organizing groups of 5, 10 25, 100, to stick together, to assist members of the group. (On the premise that if people kept their areas clean, and had specific responsbilities for others there may be better morale and less social breakdown.)

Alex Robbins

Here's a thought I'd like to throw out there: Judge Posner mentioned a "typical (and on the whole commendable) American reflex refusal to accept defeat, the choice is the scale of the rebuilding." To what extent does this emotion reflex, which I certainly share, rationally apply to responding to destructive acts of nature as opposed to destructive acts by other humans?

For example, if terrorists in Iraq kidnap an American and threaten to cut off his head unless the US government does X -- whatever that may be -- a totally natural, healthy, and appropriate response is to do not-X (conversely, a sickly and deeply problematic response is to actually do it). I think most Americans -- and probably British, Danish, Polish, Australian, and, from what we've seen so far, Iraqi people -- feel similarly. The Filipinos and Spanish are likely the exceptions. Accepting that this is a "commendable" response as a general rule, the question is -- from a utilitarian / welfare-maximizing as opposed to moral point of view -- why?

An obvious answer is that agreeing to something as a direct result of horrific violence tends to encourage horrific violence. Another reason might be that one sees oneself locked in a zero-sum game against an enemy, and thus doing the opposite of what the enemy wants you to do is a useful heuristic.

But how does this "refusal to accept defeat" fare against a natural disaster? Not so well -- nature's not out to get us, and none of the above reasoning applies when the enemy is nature rather than man. So maybe that same American resilience, so useful when dealing with human enemies, is a poor guide to dealing with nature.

That said: screw it. New Orleans is a great American city, and I would (and probably will, through taxes) pay upwards of a thousand dollars of my own money just to know that it's there again. Maybe it'll get a much-needed renaissance. In other words, I think my response is irrational in light of the foregoing, but I'll do it anyway -- and I'll pay for it too, so welfare-maximizers can't fault me for it.

sam

Wes -

Certainly, at this point in time, the benefits of the Iraq war to Americans appear small. Indeed, the war would appear to be a net loss.

However, the potential benefits are not just oil and less terrorism.

It is likely that ousting Saddam and his sons when the US did was to do so on the US's terms. In short, we may have avoided a much more costly war in the future.

Second, the benefits to Americans of a functioning liberal democracy in the Middle East are potentially enormous. Maybe the analogy implies unrealistic hope, but I cannot help but suggest that Iraq could do for the Middle East what West Germany did for Europe.

(Of course, all of this is to say nothing about general benevolence to fellow humans and whether or not that has any value.)

How does this apply to Katrina and her aftermath? It is a response to all the foolhardy pundits who reduce the complexities of our world to a hurricane-ravaged-Gulf-Coast-versus-war-in-Iraq zero-sum game.

Such a reduction either presents a false paradigm or establishes precedent for some sort of provincial isolationism.

As for the discussion regarding government aid to the reconstruction of New Orleans . . . is not our government constantly spending billions of dollars aiding people whose "irrational" behavior has imperiled them?

I think most people aren't considering good-samaritans aid when they decide where they will live. (Of course, after the deluge everyone cries for help.)

If the federal government and the state of Louisiana were to offer no aid for the reconstruction of New Orleans AND declare that under no circumstances will either offer natural disaster relief in the future would people still move back and rebuild a considerable part of the city? Perhaps.

How many smokers or obese people have medicaid and medicare in mind when they light up or snarf down? Is medicaid and medicare's coverage of preventable ailments analagous to federal disaster relief?

Wilson Tomkins

"There are four basic counterterrorist tools"

I propose a fifth:
Not providing ideological ammunition to anti-American religious fundamentalists by engaging in conflicts that enrage the very populations the fundamentalists are trying to incite.

Wes

Maybe the analogy implies unrealistic hope, but I cannot help but suggest that Iraq could do for the Middle East what West Germany did for Europe.Would that be what Germany did to Europe after the USA and friends imposed democracy following WWI or what Germany did to Europe after the USA and friends imposed democracy following WWII?...foolhardy pundits...reduce the complexities of our world to a hurricane-ravaged-Gulf-Coast-versus-war-in-Iraq zero-sum game.Despite the behavior of the Bush administration, the federal government does actually have a limited budget that should be carefully allocated to provide maximum benefit.I agree with Becker and Posner that the federal government should not finance the rebuilding of luxury vacation homes situated in places where they will be destroyed by natural disasters every few years. I would even go further to suggest that the federal government should not finance the rebuilding of corporate properties in the wake of natural disasters. I would even be OK with it if the federal government limited or dictated the terms of financial assistance for rebuilding of public infrastructure (roads, street lights, etc.).What I disagree with strongly is the contention that it is OK for the US federal government to spend hundreds of billions on a war of highly uncertain outcome but that it is not OK for the federal government to spend a small fraction of that amount (something like $10,000 per person for a total cost of $5 billion - 2.5% of the cost of the war so far) providing immediate assistance and the basic necessities of life (food, water, shelter, etc.) to victims of natural disasters in the United States.More broadly, I object to the Bush administration's tendency to compare narrow minded speculation about extreme cases to actual realities on the ground. Sure, the war in Iraq could save millions of lives by preventing a future terrorist attack but, then again, investing the same money in asteroid defenses could save the planet from total annihilation. Extreme case speculation can justify just about anything but when it comes down to it there are thousands and thousands of people actually dying every day of totally preventable causes (inadequate nutrition, curable diseases, traffic accidents, etc.).The way I see it, the first priority of the US federal government should be to make sure everyone has access to the basic necessities of life (food, water, shelter and some level of medical care, education and transportation). Any money that is left over can be used for (speculative) projects to improve the future but decisions on how to allocate the money should consider all possible uses of the money. If, for example, the USA has a hundred billion left over when it has taken care of its necessary expenses and its past debts then it could decide whether to spend the hundred billion on a war in Iraq, on a war somewhere else, on asteroid defenses, on scientific research or something else entirely.

Alexander Reed

"Emergency response measures if an attack occurs, designed to minimize human and property damage."

I respect the government's role in protecting the life of its citizens and minimizing the human damage. But property damage? Should the government be responsible for these damages, when doing so promotes moral hazard on so many levels?

In hindsight FEMA should have resisted its transformation to a property/infrastructure insurer (with the exception of federal property). FEMA should have stictly focused on protecting human lives during disaster. Because it was distracted with property protections, we have created (1) the moral hazard problem for citizens and (2) the property insurance behemoth that distracts FEMA from its primary task.


FEMA should jump ship from property insurance. Localities are entirely capable of insuring local infrastructure; individuals are capable of insuring private property. If the insurance proves unaffordable, then perhaps society is not ready to accept the risk.

Alex Robbins

"The way I see it, the first priority of the US federal government should be to make sure everyone has access to the basic necessities of life (food, water, shelter and some level of medical care, education and transportation)."

The way I see it, coercion is most clearly justified when immediately necessary to protect other human beings from violence. Since at root government is based on coercion (taxes aren't voluntary, and if you resist you will eventually be dealt with forcibly), the most clearly justifiable government actions are those immediately necessary for the protection of other human beings -- if we take a political rather than moral point of view, however, we might want to replace "human beings" with "citizens."

From the moral point of view, then, for obvious reasons, destroying the regime of Saddam Hussein was a more worthwhile government endevor than making sure everyone has access to the basic necessities of life (assuming we can agree on what those are). Similarly, by this reasoning, the greatest failing of the government in New Orleans would have been allowing the social order to break down, and/or restricting the ability of victims to escape from the flooding and from preditors who threatened them.

If, on the other hand, you think that the primary role of government is to provide basic necessities rather than to protect people, then the government must be expected to exert a fairly substantial amount of control over the natural world (rather than simply over other humans). From this point of view, the fact that Katrine caused the damage it did would be the greatest governmental failing.

Philisophically, I think the protection role makes more sense for the government than the provider role, but the debate is a fairly old one...

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