The public choice economics of crisis management

Why don’t governments handle all crises well?  Read Brad DeLong’s catalog of charges on Katrina.  I can think of a few systematic reasons for institutional failure:

1. The event is often small-probability in nature.

2. The event has very negative consequences, and we don’t have optimal punishments for those who get it wrong.

3. Many crisis-related events and required decisions happen quickly in immediate sequence.  First, it is hard to get the decisions right, second it is even harder to look good, given some inevitable mistakes.

4. Media scrutiny is intense, and voters care about the issue.  This encourages ex post overreactions and overinvestments in symbolic fixes, especially when combined with #1.

5. A crisis is, by definition, large.  This puts federalism, whatever its other merits, at a disadvantage.  No one is sure who is responsible for what, or how a chain of command should operate.

All of these seem to have operated in New Orleans, plus they were combined with one of our worst-functioning local governments and an administration especially weak on the issue of accountability.  My colleague Roger Congleton has a paper on the public choice of crisis management.  This is an underexplored topic, so feel free to suggest other readings in the comments.


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