Friday, November 2, 2012

I'm curious where everyone falls out on these disaster economics claims. This is what I think...

1. Disasters that don't severely damage the capital stock boost GDP relative to the counterfactual, especially when the economy is weak.

2. Disasters reduce welfare.

3. Disasters reduce wealth.

4. It would be better to decentralize FEMA but maintain subsidization of disaster areas with the infusion of federal funds.

5. Restrictions on price gouging are a bad idea. Increasing prices compensates for the risk of delivering goods in disaster areas and should rarely price people out of the market. When it does price people out of the market, donations are surely entering the areas where the prices are highest.

6. Unlike price restrictions, quantity restrictions on individual buyers can be a very good idea. You don't want some yuppie who simply lost power freaking out and clearing out the shelves because he got there first when his neighbors a couple blocks away were devastated. "Limit 5 per household" restrictions are extremely reasonable.

7. Private actors are extremely important for recovery. I see no good reason why government should restrict private actors from entering and operating in disaster areas.

8. Private actors (for and not for profit) are not sufficient for recovery in large disasters. Demonstrating the importance of private actors is not logically equivalent to demonstrating that public actors are unnecessary, and no one should pretend the claims are equivalent.

9. People who get angry that other people are even discussing the possibility that disasters are related to climate change are imposing costs on future generations. People that are simply skeptical of the idea are not imposing costs on future generations. Informed skepticism leads to better climate science. It's never easy to pin one weather event to climate change, after all.


  1. I agree with 1,2,3,5, and 7. On 6 I'm fine if the store does it, but not if the government orders it.

  2. "For this is the salient point: private organizations, whether for-profit or non-profit, perform or lose their customers or their donors. When a private entity fails to deliver on its promise, or actually causes harm, it is held liable for the failure and pays the damages. When government fails, it gets a bigger budget and even more power." - Mary L. G. Theroux, Public and Private Responses to Katrina

    We can solve this problem simply by allowing taxpayers to shop for themselves in the public sector.

  3. Here's why quantity restrictions don't work:

    The family splits up and each buys the maximum quantity. The store owner, who is already forced to sell the goods at below their true market value, isn't going to add to his costs by policing who belongs to which household. You really ought to think this stuff through before you post it.

    1. That's why quantity restrictions won't be perfectly enforced.

      It is not why they are not a good idea.

      You should think this stuff through before you post it.

      And next time, after you've thought it through, please don't post anonymously.


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