When Government Fails . . . Blame the Market!!!

When the contrast between the efficient performance of market organizations like Wal-Mart and FedEx and the incomptent performance of govertment becomes too embarrassing, what do you do? If you're Daniel Gross, you try desperately to lay the blame for some of the impact of the disaster on efficient management and logistics!

But Wal-Mart and the private sector in general are getting way too much credit for their intermittently impressive relief efforts. In fact, the economic and management trends that Wal-Mart and FedEx typify may have been responsible for some of the post-Katrina suffering.

OK. So what's are the trends?

Wal-Mart and FedEx are the platonic exemplars of the Just-in-Time economy, which prescribes keeping inventories low, maintaining the precise amount of capacity needed, and building and exploiting hyperefficient supply chains.

Great. And so what? So, Gross tells us, a privately owned hospital lost its power! Bell South and Entergy had a lot of their physical infrastructure destroyed and so couldn't provide phone service and electricity! Some refineries got badly damaged and so couldn't move gas!

Gross's painfully ill-executed attempt to connect things that aren't connected makes plain that the problem here has nothing to do with just-in-time-ism. How well did electricity, phone, and gas fare in natural disasters before the just-in-time revolution? Well, worse! Did Hospitals formerly have more backup generators? No. Gross is implying that there was a less efficient time in which these systems were at least more robust, and this lost of robustness cost us. But the less efficient but more robust age never was. He's just bullshitting us. With more efficient and thefore faster and cheaper wholesalers and shippers, stuff that gets broken is easier to fix faster, cheaper. The whole system is more robust, and heals more quickly.

Russ Roberts points out that although many of the most intense hurricanes are recent, the biggest death tolls are long in the past. We are more robust because we are wealthier. And we are wealthier because companies like Wal-Mart and FedEx contribute to the production and accumulation of wealth through their efficiency. In addition to getting stuff where it needed to go when the government couldn't, Wal-Mart and FedEx save lives by raising our standard of living.

Gross crows that oil released from the emergency reserves is keeping prices down.:

After Katrina, the federal government began to release crude oil from the Strategic Petroleum Reserve. And it came just in time. The move helped lower the price of crude, keep refineries humming, and calm panicky consumers.

There's no doubt the government could learn a great deal from the private sector about how to prepare for and respond to a natural disaster. But the private sector may have something to learn from the government, too.

But the private sector already learned its lesson from the government on this score. The lesson is that there's no benefit in stockpiling oil inventory. The existence of a government reserve is one of the very reasons that the private system is less robust than it otherwise might be, and if Gross was honest, he'd point that out. If the government is going to flood to market to keep down prices whenever there is a shortage, the potential gains from private stockpiling are dissipated, and so there are fewer private stockpiles.

So, what's the lesson for the government? No price system — no consistent, credible, clear feedback on performance — equals woeful inefficiency.

And what's the lesson for Daniel Gross? That Daniel Gross should get a clue.

Come to the Liberation Biology Book Forum!!!

If you're in the DC area, I implore you to come to the book forum Cato is hosting on Ron Bailey's new blockbuster, Liberation Biology: The Scientific and Moral Case for the Biotech Revolution. Ron will talk about his book, and Mark Sagoff, one of the world's leading experts in environmental ethics, including work on genetic manipulation, will comment Ron's book. To register, go to the Cato registration page for the event.

Here's the full info:

Liberation Biology: The Scientific and Moral Case for the Biotech Revolution
Prometheus Books, 2005

Wednesday, September 28, 2005
12:00 PM (Luncheon To Follow)

Featuring the author, Ronald Bailey, Science Correspondent, Reason magazine, Adjunct Scholar, Cato Institute; with comments by Mark Sagoff, Senior Research Scholar, Institute for Philosophy and Public Policy, University of Maryland, and President, International Society of Environmental Ethics; and moderated by Will Wilkinson, Policy Analyst, Cato Institute.

The Cato Institute
1000 Massachusetts Avenue, NW
Washington, DC 20001

In his new book, Ronald Bailey evaluates the political and ethical issues raised by scientific advances and shines a light on the vastly exaggerated concerns of opponents of biotechnology and stem cell research. Bailey explains why scientists, doctors, and individual citizens—not politicians—should confront the uncertainties that come with biotech just as they confronted concerns about the ethics of X-rays, birth control pills, bypass surgeries, and in vitro fertilization when they were first introduced. Bailey argues that patients should have the freedom to embrace or reject stem cell and biotech benefits based on their own personal or religious values. Join us for a discussion of the future of biotech and freedom.

Cato events, unless otherwise noted, are free of charge. To register for this event, please fill out the form below and click submit or email events@cato.org, fax (202) 371-0841, or call (202) 789-5229 by 12:00 PM, Tuesday, September 27, 2005. Please arrive early. Seating is limited and not guaranteed. News media inquiries only (no registrations), please call (202) 789-5200. If you can't make it to the Cato Institute, watch this forum live online.

Tribal Exceptionalism

Here's the conclusion to Matt's entertaining Prospect piece on the incompetence of Bush appointees:

The other possibility is that Republicans are so convinced that government is inefficient and full of people who don't know what they're doing that it just doesn't occur to them to do it any other way.

Nice. Naturally, Matt is implying that there is some other way to do it. But, no. The Republicans are right; that's just how government works. The problem with the Republicans is that they, being invested with power, are insufferably opportunistic hypocrites. They're not uniquely prone to cronyism. They're just prone to being in power, which is the enabling condition for the cronyism to which all political types aspire. And they're prone to the horribly annoying-to-libertarians habit of throwing libertarian-tinged rhetoric around when, obviously, they're champion statists. Now, I know Matt's a tough-minded realist. So I guess the point of implying that Democrats are less likely to “play politics” with political power was just to affirm his readers' unfounded faith in their tribe's intelligence and virtue. In that case, job well done.

What's the Deal With Intelligent Design?

If you're in DC come by tonight's AFF Roundtable where I'll be giving my thoughts, along with Ron Bailey and others, on the what the ID debate says about American politics and culture. Here's the details:

What’s the deal with Intelligent Design?

September 14, 2005 | America's Future Foundation

Join us on Wednesday, September 14, for the next AFF Roundtable: “What’s the deal with Intelligent Design?” Our panelists will ask what the debate over Intelligent Design tells us about American politics and culture. Is ID backlash for loss of local control over public schools and secularization of the curriculum? Is it symptomatic of a deepening cultural divide in America? Panelist will be Will Wilkinson of the Cato Institute; Ron Bailey of Reason Magazine; Blake Dvorak of the Washington Times; and Janice Crouse of Concerned Women for America.

The event will take at the Fund for American Studies, 1706 New Hampshire Avenue, NW, near Dupont Circle. Drinks at 6:30; Roundtable begins at 7:00. Roundtables are free for members, $5 for non-members. So join!

Pictures with Giants

On Saturday I attended a Mercatus Center reception at the American Political Science Association in honor of Douglass North's new book, Understanding the Process of Economic Change. Doug is an intellectual hero of mine, and I was delighted to finally get a picture with him.


(You can check out my review of Understanding the Process of Economic Change in the Cato Journal here. [.pdf])

And, as a bonus, I had to opportunity to get a snap with Elinor and Vincent Ostrom, two more heroes of mine.


If you read and understood everything Doug North and the Ostroms have written (something I certainly haven't done), you would know about as much about the nature of economic and political instutions as anyone alive.