New Orleans: You're On Your Own

by hilzoy

Peter Gosselin had a very good story on reconstruction in New Orleans in yesterday's LATimes. In it, he makes two different points, both of which are very important.

The first is that despite President Bush's promises, the federal government has really failed to deliver a lot of badly needed assistance:

"But in recent weeks, a new reality has settled in as the agencies that were stepping up to help guide the city's comeback have stepped back down again.

FEMA said it would stop covering the hotel costs of more than 50,000 households at the beginning of December — later extended until Jan. 7 — even while acknowledging that many, especially in New Orleans, would have trouble finding alternative accommodations.

Despite repeated pleas, the corps and the White House refused to promise any strengthening of the levees beyond what was underway. Investigators, meanwhile, concluded that several of the protective walls that failed did not meet corps-approved standards, a discovery that raised doubts about the safety of the entire levee system.

Emergency spending slowed sharply. The national flood insurance program temporarily suspended claims payments for Katrina, and program officials hinted broadly that they would tighten eligibility requirements to get coverage for the next storm.

Even the tiny agency charged with gauging the elevation of America's ground added an unexpected hurdle. It quietly announced that New Orleans and environs had sunk more than anticipated, forcing it to replace all of its measuring sticks. The result is that New Orleanians will have to build higher to escape future floods.

With so many new strikes against it, the city's recovery, already grindingly slow, has ground still slower. Three months after the storm, Entergy New Orleans, the bankrupt utility that serves the city, said that 55,000 of its 190,000 customers had resumed electrical service. Municipal officials estimate that less than one-third of the population has returned to live.

To an extent almost inconceivable a few months ago, the only real actors in the rebuilding drama at the moment are the city's homeowners and business owners. To be sure, Washington is offering many relief payments, tax breaks and FEMA trailers. The city is speeding the approval of building permits. But for the rest, individual New Orleanians are struggling to come back largely under their own power, using mostly their own resources and negotiating their return substantially on their own terms."

This is unconscionable all by itself. But it's a lot worse given the second point: that rebuilding New Orleans is, in large part, the sort of collective action problem in which the government can play an absolutely crucial role. And its failure to step up to the plate means that it is not doing what only it can do to help solve that problem.

""There is no market solution to New Orleans," said Thomas C. Schelling of the University of Maryland, who won this year's Nobel Memorial Prize in Economic Sciences for his analysis of the complicated bargaining behavior that underpins everything from simple sales to nuclear confrontations.

"It essentially is a problem of coordinating expectations," Schelling said of the task that Vignaud and her neighbors must grapple with. "If we all expect each other to come back, we will. If we don't, we won't.

"But achieving this coordination in the circumstances of New Orleans,'' he said, "seems impossible.""

There are many situations in which individuals, acting on their own, manage to bring about really good outcomes. Take buying groceries: each of us wants to buy the groceries we want, preferably groceries of high quality at low prices that we can get without going to a lot of trouble. Grocery store owners want to sell a lot, and this gives them an incentive to provide what the groceries we want at competitive prices in convenient locations. If they guess wrong about what we want, how much we are willing to pay for it, or how far we are willing to go to get it, they lose out. So it is in their interest to figure out our preferences, and by and large they do a very good job.

But there are other situations in which individuals, acting on their own, do not manage to bring about good actions. One standard example is this: imagine a fishery that is being overfished, and whose fish population will crash if present trends continue. All the fishermen, let's suppose, would rather that everyone limit their catches, so that the fishery will survive and they can keep making a living from it. And they would prefer this to everyone continuing to overfish until all the fish are gone: they are willing to forego some fish (and thus some income) now in order to preserve their livelihoods over the long run.

The problem is that "everyone" (or: "all the fishermen") is not a person who can decide what "everyone" is going to do. And even though everyone might prefer to forego some fish now in exchange for the long-run viability of the fishery, that is not the choice that any individual fisherman faces.

The individual fishermen face this quite different choice: should I keep overfishing, or should I not? If I do keep overfishing, then it probably won't make a difference to the long-run viability of the fishery. After all, I am only one person, and my contribution to the overfishing problem is not all that big. (Suppose that this is true.) So I could keep overfishing and enjoy the fishery over the long haul. On the other hand, if I don't keep overfishing, then I will sacrifice some income now without any guarantee that the fishery will survive. That depends on the choices of other people, and I am not them. So it looks as though it's rational for me to keep overfishing.

In a situation like this, everyone might prefer that everyone stop overfishing, allowing the fishery to survive. But no one gets to decide what "everyone" will do. Each person has to decide for him- or herself. And it's rational for each individual to decide to keep catching as many fish as possible. As a result, an outcome that everyone agrees is worse is all but guaranteed.

However, there is one thing that our fisherfolk could do to solve this problem. They could collectively decide to take steps that would alter the choices individuals face in such a way as to make it more likely that they would end up with the preferred outcome: saving the fishery. One way to do this would be to set limits on how much everyone can catch, and hire someone to enforce those limits. If the enforcement was credible, this would replace the choice "fish more now, get more money, and don't (by myself) affect the long-term health of the fishery; or fish less now, get less money, and don't affect the long-run health of the fishery" with a different choice: "fish more now, get more money if I don't get caught, but risk losing all my fish and going to jail; or don't fish now, don't get more money, and don't risk losing all my fish and going to jail". This makes it a lot more likely that people would choose not to overfish.

For this reason, collective action can help the fishermen get to the solution that they all prefer, while individual choices without collective action would leave them with an outcome that's worse for everyone. And this is one of the standard cases in which government action makes sense.

In the specific case of rebuilding New Orleans, there are several things the government could do to help:

* First, it could commit to rebuilding the levees as soon as possible. But there is no such commitment:

"If they put back good levees to the [Category 3] level authorized before Katrina and we can get a commitment to build them slowly up to Category 5, people will come back," said Walter Isaacson, a News Orleans native, former editor of Time magazine, former chairman of CNN and co-chairman of the Louisiana Recovery Authority, a new state board appointed by Gov. Kathleen Babineaux Blanco to oversee reconstruction. "It won't be a purely rational decision, but they'll come."

But the corps has made it clear that it has no intention of making any such grand commitment soon."

* Second, FEMA could assure residents that they will be able to buy flood insurance through its flood insurance program. Instead, it might as well be trying to maximize uncertainty:

"Homeowners are worried — apparently with good reason — that the rules are about to be changed so that many will have to literally raise their houses in order to qualify for flood insurance. For tens of thousands like Vignaud, whose post-World War II suburban homes were built on concrete slabs rather than above the ground on piers, that's a near impossibility.

New Orleans now requires owners to comply with a 1984 map that divvies the city into dozens of districts, each with a different base flood elevation that's dependent not just on where a structure is relative to sea level but also on how good local drainage and the city's pumping system are in that area.

Michael K. Buckley, deputy director of the national flood insurance program, said in an interview that FEMA was about to announce that it thought the city would need to raise those flood elevations 1 to 3 feet."

Either of these steps would help New Orleans residents to decide whether they want to return or not. In the case of rebuilding the levees, it would do so by providing something that private individuals cannot provide for themselves -- another standard case for government action.

But what makes rebuilding New Orleans a collective action problem is this: when people try to decide whether or not to rebuild, one of the questions that affects their decision is whether or not other people in their neighborhoods will rebuild as well. For most of us, a neighborhood is a lot more attractive when it includes actual neighbors than when it's just a lot of wrecked and deserted houses in an area whose only actual resident is you. Or, as the LATimes article says:

"Laurie Vignaud faces a double dilemma: If she rebuilds her wrecked ranch house at 1249 Granada Drive in the great suburban expanse south of Lake Pontchartrain, will her neighbors do the same? And even if they do, will that guarantee their Gentilly neighborhood does not end up an isolated pocket in a diminished, post-Katrina New Orleans?

Nothing in Vignaud's 46 years, not even her job as affordable housing vice president with Hibernia Bank, the region's biggest financial institution, prepared her for this problem. From her relocated offices in Houston, she recently confessed, "It's scary."

"I don't know when I'll ever go home.""

No one knows how many people will actually return to New Orleans. Presumably, the number of people who do return would be higher if people knew that others would be returning as well. This is why Thomas Schelling says this:

"There is no market solution to New Orleans," said Thomas C. Schelling of the University of Maryland, who won this year's Nobel Memorial Prize in Economic Sciences for his analysis of the complicated bargaining behavior that underpins everything from simple sales to nuclear confrontations.

"It essentially is a problem of coordinating expectations," Schelling said of the task that Vignaud and her neighbors must grapple with. "If we all expect each other to come back, we will. If we don't, we won't."

This is not a problem that individual agents can solve for themselves. It takes some form of collective action. The federal government could play a very important role here by doing things that would increase people's confidence that other people would return. It could help people to communicate with one another about their plans. It could take steps, like rebuilding the levees, that would make returning seem like a better idea: after all, if you had just been through Hurricane Katrina and the government wasn't rebuilding the levees at least to category 3, would you want to return? And would you expect that your neighbors would? It could provide more assistance to homeowners seeking to rebuild, especially in meeting any new building requirements designed to protect the city in case of another flood.

Any of these steps would help to solve the collective action problem caused by the fact that people's decisions about whether or not to return to New Orleans depend in large part on what they expect other people to do. Moreover, with both the New Orleans and Louisiana governments stretched to the breaking point, the federal government is probably the only body that could do this at the moment. And yet we are not taking them.

If we want to give up on New Orleans, we should do so explicitly, and spare some of its citizens the heartache and expense of trying to rebuild their homes when the nation has no intention of supporting their decision. If we want to help the city to rebuild, then we need to get serious, and recognize that some of the problems New Orleans faces are not problems that individuals will solve alone. One way or another, we should make our position clear. But we should not try to have it both ways: having a President who says that "there is no way to imagine America without New Orleans, and this great city will rise again" on national television, and then quietly allows New Orleans to die.

Comments

[bob mcmanus]

Louisiana is now a solidly Republican state, and Trent Lott will get his new mansion. I expected nothing better.

[John Thullen]

"..collective action problem.."

Whaddaya, some kind of outside agitator? You come in here and start monkeying with our way of life, which excludes collective action of any kind, includin them orgies that you elitists perfessors like to git it on with our youngins ... ya know, the ony thing the gummit is good fer is keeping a close eye on you. Do the words "extraordinary rendition" mean anything to ya, missy?

In other news, Republican revolutionary and orgy-monger Bob Livingston has pledged "revolution" against the Federal government because of the poor response to Katrina. Course that probably only means he's been caught yet again in the alternative minimum tax and the contracts his cronies were expecting to build new levees out of cream cheese and chewing gum (cheap materials, high overhead, big margins)are stuck in some liberal bureaucrats in-box cause the person is too busy macrameing some hippie Pro-Ritalin posters to subvert our energetic kids so they cain't go take a mortar shell up their intelligently designed wazoo in God's war in the U.S. of Iraq.

Didn't some of the Founding Fathers make noises about the fact that if the government ain't up to snuff, and there isn't an election on the near horizon, that maybe some intervening excitement and rearrrangement ought to take place?

Or did they lack the will to win, too?

How come mentioning the Bush Administration's God-awful Katrina disaster isn't against the posting rules here. How can the words "the Bush Administration's response to Katrina" make it through the servers and a simple f###ed can't?

They're synonyms for crying out loud.

Also, what McManus said.

Also, what I just said.

[Debbie(aussie)]

It was very sad watching the events of Katrina unfold from the other side of the world. Might I even say stunning, was the govts (at all levels) inability to do what needed to be done in an even,t that was as inevitable as it was forewarned. Is this another example of the lack of foresight of govt's? souldn't they have had a plan in place for the rebuilding of NO and the surrounding areas [same as for Iraq, cross your fingers and hoe for the best].

[Frank]

I don't find this even slightly surprising. I'm not even dismayed at my own lack of surprise anymore. These people are good at two things; winning elections, and stealing from the treasury. Neither are of any use for rebuilding New Orleans, so it won't happen.

(John I particularly liked the cream cheese and chewing gum construction idea, actually now that I think of it we should probably test the levees that failed for the presence of cream cheese and chewing gum. On the other hand maybe you shouldn't be giving them ideas.)

[dutchmarbel]

I was really shocked to learn that the government had stopped searching for bodies in houses.

Imagine this...
You watch on TV the news that your mother's city has been destroyed by the latest disaster. For days you wait to hear from her. Days pass into weeks but still no word. Your hope of finding her alive fades. Frantically you call everyone in government but to no avail. You tell yourself to let the rescuers do their job. You await word from the morgue but it does not come. You hear they are backed up so you wait. Two months later you are allowed to go to her home. Hoping to retrieve what you can..... documents, the precious family photos, you enter her home only to find your mother's decomposing body in her living room.

[Tim]

Like Bob, I expected nothing less. Republicans are constitutionally incapable of giving money to anyone outside of their tribe, even if the money comes from outside.

[julian]

I do not hear about union bricklayers from the north east or any part of the united states getting contracts to build america.

The union constuction famly in the north such as rochester new york. We have abundamente of high skilled union constriton work force. All the union constrution trades require 4-5 year apprentic ship programs. The union's have the highest safty record on any job sites.The craftmenship from the foundation up! mean the best hands in america produce construction on time saving millions of dollars for the local taxpayers. My family (julian)gave $200. to help build homes for our fellow americans. I would be humbled if the US goverment would ask the union community accross this nation to organize to help build the south gov.buldings,schools,fire houses,hospitals.police station.Union's have build our country in the past from WW1 and WW2. The constuction union families in the united states will be proud knowing swet and hard work build a stronger America which will last for generations. I love my country. My heart acks for the american families. I wounder if my passion as american will open the eyes and hearts of goverment to put union constrution worker from all trades to building my country which we all love. From my famiy to yours Thomas,Ruth,Nicholas Julian. Also BAC Local #3 Rochester New York.

[Gary Farber]

Before I read further, I have to make a housekeeping sort of comment.

This is very likely just a case of confusion in cutting pasting, or it's otherwise certainly just overlooking the issue.

But you've reordered your quotes from the article, Hilzoy, presenting them out of order as written. I have no problem whatever with anyone doing that, since it's the clearest way to respond to something sometimes. What I do have very strong personal opinions about is that when one reorders quotes out of their original order, that one notes that.

This is, to be sure, my opinion, and not Blogger Law. And no meaning is changed here at all that I can see. I'm just speaking on general principle, not on any change of meaning in this example.

I just had to say that, since my initial reaction was "huh? wha?," and I had to go back and forth between article and post a couple of times to make sure that I wasn't hallucinating, or suffering a reading disorder, or Idunnowhat; I hope that it's okay to note this. Carry on otherwise with yer fine work.

[Gary Farber]

Now having read the whole post, I'm seeing palimpsests.

Is it possible to categorize the potential problem at issue as a subset of the tragedy of the commons, by the way?

I'd missed the article, by the way, so thanks for calling my attention to it.

[Bernard Yomtov]

we should not try to have it both ways: having a President who says that "there is no way to imagine America without New Orleans, and this great city will rise again" on national television, and then quietly allows New Orleans to die.

No. We shouldn't. For more, see also this, from the LA Times.

[Gary Farber]

"For more, see also this, from the LA Times."

I'm not qualified to have an opinion, and so it's unsurprising that I don't have one, to the point where my lack of knowledge is such that the answer to my following question is probably "no," and I don't know that, but hasn't the entire question of how best to deal with wetlands and barrier islands and levees in the context of what's the "best" means of hurricane protection been under debate for more than one hundred-fifty years or so?

All I really know is that I've read many dozens of articles on such topics, particularly so in the last few years, and I know I don't know.

[hilzoy]

Gary: "But you've reordered your quotes from the article, Hilzoy, presenting them out of order as written. I have no problem whatever with anyone doing that, since it's the clearest way to respond to something sometimes. What I do have very strong personal opinions about is that when one reorders quotes out of their original order, that one notes that."

Ah. I didn't know that. I mean, it generally works out that way, but sometimes I make points in a different order than the person who wrote the story. (I do try not to reorder in such a way as e.g. to make it seem as though someone is talking about X when he or she is really talking about Y, and so on.) But I see your point, and will act accordingly.

[Gary Farber]

"But I see your point, and will act accordingly."

It may be overly cautious of me to hold such a general principle, even absent any obvious change of meaning. My reasoning is that, however, just because I don't note that I'm changing another person's meaning when I present quotes from their writing out of order in a way which doesn't note my reordering doesn't mean they won't see a point I've missed noting that I'm unintentionally distorting or losing.

So I figure that it's not too much effort for me to merely take note, by such usages as "Earlier, Hilzoy said" or "prior to this, Hilzoy asserted that," and the like.

But, as I said, this is just my own practice, and violation is not yet actually a criminal, or even civil, offense. (Were it so, I'd make the penalty only a nickel fine, or thereabouts.)

[rilkefan]

hilzoy, while you're at it, could you make sure that in your quotations the line breaks appear at the same place as in the original? I find doing so helps preserve the writer's intended rhythm and hence meaning. When I can't manage that for whatever reason, I take note by adding "\" marks to indicate the source's intent.

[DaveC]

The federal government could play a very important role here by doing things that would increase people's confidence that other people would return.

Publicize that the murder rate is down?

This was a serious problem prior to Katrina, and maybe people don't want to go back to that.