Tag Archives: Louisiana

Shortfalls in non-profit disaster rebuilding

This post originally appeared at Market Urbanism, a blog about free-market urban development.

After receiving years of praise for its work in post-Katrina recovery, Brad Pitt’s home building organization, Make It Right, is receiving some media criticism. At the New Republic, Lydia Depillis points out that the Make It Right homes built in the Lower Ninth Ward have resulted in scarce city dollars going to this neighborhood with questionable results. While some residents have been able to return to the Lower Ninth Ward through non-profit and private investment, the population hasn’t reached the level necessary to bring the commercial services to the neighborhood that it needs to be a comfortable place to live.

After Hurricane Katrina, the Mercatus Center conducted extensive field research in the Gulf Coast, interviewing people who decided to return and rebuild in the city and those who decided to permanently relocate. They discussed the events that unfolded immediately after the storm as well as the rebuilding process. They interviewed many people in the New Orleans neighborhood surrounding the Mary Queen of Vietnam Church. This neighborhood rebounded exceptionally well after Hurricane Katrina, despite experiencing some of the city’s worst flooding 5-12-feet-deep and being a low-income neighborhood. As Emily Chamlee-Wright and Virgil Storr found [pdf]:

Within a year of the storm, more than 3,000 residents had returned [of the neighborhood’s 4,000 residents when the storm hit]. By the summer of 2007, approximately 90% of the MQVN residents were back while the rate of return in New Orleans overall remained at only 45%. Further, within a year of the storm, 70 of the 75 Vietnamese-owned businesses in the MQVN neighborhood were up and running.

Virgil and Emily attribute some of MQVN’s rebuilding success to the club goods that neighborhood residents shared. Club goods share some characteristics with public goods in that they are non-rivalrous — one person using the pool at a swim club doesn’t impede others from doing so — but club goods are excludable, so that non-members can be banned from using them. Adam has written about club goods previously, using the example of mass transit. The turnstile acts as a method of exclusion, and one person riding the subway doesn’t prevent other passengers from doing so as well. In the diagram below, a subway would fall into the “Low-congestion Goods” category:

club goods

In the case of MQVN, the neighborhood’s sense of community and shared culture provided a club good that encouraged residents to return after the storm. The church provided food and supplies to the first neighborhood residents to return after the storm. Church leadership worked with Entergy, the city’s power company, to demonstrate that the neighborhood had 500 residents ready to pay their bills with the restoration of power, making them one of the city’s first outer neighborhoods to get power back after the storm.

While resources have poured into the Lower Ninth Ward from outside groups in the form of $400,000 homes from Make It Right $65 million  in city money for a school, police station, and recreation center, the neighborhood has not seen the success that MQVN achieved from the bottom up. This isn’t to say that large non-profits don’t have an important role to play in disaster recovery. Social entrepreneurs face strong incentives to work well toward their objectives because their donors hold them accountable and they typically are involved in a cause because of their passion for it. Large organizations from Wal-Mart to the American Red Cross provided key resources to New Orleans residents in the days and months after Hurricane Katrina.

The post-Katrina success of MQVN relative to many other neighborhoods in the city does demonstrates the effectiveness of voluntary cooperation at the community level and the importance of bottom-up participation for long-term neighborhood stability. While people throughout the city expressed their love for New Orleans and desire to return in their conversations with Mercatus interviewers, many faced coordination problems in their efforts to rebuild. In the case of MQVN, club goods and voluntary cooperation permitted the quick and near-complete return of residents.

Governors’ Priorities in 2013: Medicaid Funding, Pension Reform

As the month of March draws to a close, most governors have, by this point, taken to the podiums of their respective states and outlined their priorities for the next legislative year in their State of the State addresses. Mike Maciag at Governing magazine painstakingly reviewed the transcripts of all 49 State of the State addresses delivered so far (Louisiana, for some reason, takes a leisurely approach to this tradition) and tallied the most popular initiatives in a helpful summary. While there were some small state trends in addressing hot-button social issues like climate change (7 governors), gay rights (7 governors), and marijuana decriminalization (2 states), the biggest areas of overlap from state governors concerned Medicaid spending and state pension obligations.

Medicaid Spending

Judging from their addresses, the most common concern facing governors this year is the expansion of state Medicaid financing prompted by the Supreme Court’s ruling on the Affordable Care Act last year. While the ACA originally required states to raise their eligibility standards to cover everyone below 138 percent of the federal poverty level, the Supreme Court overturned this requirement and left up to the states whether or not they wanted to participate in the expansion in exchange for federal funding or politely decline to partake.  The governors of a whopping 30 states referenced the Medicaid issue at least once during their speech. Some of the governors, like Gov. Phil Bryant of Mississippi, brought up the issue to explain why they made the decision to become one of the 14 states that decided not to participate in the expansion. Others took to defending their decision to participate in the expansion, like Gov. John Kasich of Ohio, who outlined how his state’s participation would benefit fellow Buckeyes suffering from mental illness and addiction.

Neither the considerable amount of concern nor the markedly divergent positions of the governors are especially shocking. A recent Mercatus Research paper conducted by senior fellow Charles Blahous addresses the nebulous options facing state governments in their decision on whether to participate in the expansion. This decision is not one to make lightly: in 2011, state Medicaid spending accounted for almost 24 percent of all state budget expenditures and these costs are expected to rise by upwards of 150 percent in the next decade. The answer to whether a given state should opt in or opt out of the expansion is not a straightforward one and depends on the unique financial situations of each state. Participating in the Medicaid expansion may indeed make sense for Ohioans while at the same time being a terrible deal for Mississippi. However, what is optimal for an individual state may not be good for the country as a whole. Ohio’s decision to participate in the expansion may end up hurting residents of Mississippi and other states who forgo participating in the expansion because of the unintended effects of cost shifting among the federal and state governments. It is very difficult to project exactly who will be the winners or losers in the Medicaid expansion at this point in time, but is very likely that states will fall into one of either category.

Pensions

Another pressing concern for state governors is the health (or lack thereof) of their state pension systems. The governors of 20 states, including the man who brought us “Squeezy the Pension Python” himself, Illinois Gov. Pat Quinn, tackled the issue during their State of the State addresses. Among these states are a few to which Eileen has given testimony on this very issue within the past year.

In Montana, for instance, Gov. Steve Bullock promised a “detailed plan that will shore up [his state’s] retirement systems and do so without raising taxes.” While I was unable to find this plan on the governor’s website, two dueling reform proposals–one to amend the current defined benefit system, another to replace it with a defined contribution system–are currently duking it out in the Montana state legislature. While it is unclear which of the two proposals will make it onto the law books, let’s hope that the Montana Joint Select Committee on Pensions heeds Eileen’s suggestions from her testimony to them last month, and only makes changes to their pension system that are “based on an accurate accounting of the value of the benefits due to employees.”

States Aim to Eliminate Corporate and Individual Income Taxes

Although the prospects of fundamental tax reform on the federal level continue to look bleak, the sprigs of beneficial tax proposals in states across the US are beginning to grow and gain political support. Perhaps motivated by the twin problems of tough budgeting options and mounting liability obligations that states face in this stubborn economy, the governors of several states have recommended a variety of tax reform proposals, many of which aim to lower or completely eliminate corporate and individual income taxes, which would increase state economic growth and hopefully improve the revenues that flow into state coffers along the way.

Here is a sampling of the proposals:

  • Nebraska: During his State of the State address last week, Gov. Dave Heineman outlined his vision of a reformed tax system that would be “modernized and transformed” to reflect the realities of his state’s current economic environment. His bold plan would completely eliminate the income tax and corporate income tax in Nebraska and shift to a sales tax as the state’s main revenue source. To do this, the governor proposes to eliminate approximately $2.8 billion dollars in sales tax exemptions for purchases as diverse as school lunches and visits to the laundromat. If the entire plan proves to be politically unpalatable, Heineman is prepared to settle for at least reducing these rates as a way to improve his state’s competitiveness.
  • North Carolina: Legislative leaders in the Tar Heel State have likewise been eying their individual and corporate income taxes as cumbersome impediments to economic growth and competitiveness that they’d like to jettison. State Senate leader Phil Berger made waves last week by announcing his coalition’s intentions to ax these taxes. In their place would be a higher sales tax, up from 6.75% to 8%, which would be free from the myriad exemptions that have clogged the revenue-generating abilities of the sales tax over the years.
  • Louisiana: In a similar vein, Gov. Bobby Jindal of Louisiana has called for the elimination of the individual and corporate income taxes in his state. In a prepared statement given to the Times-Picayune, Jindal emphasized the need to simplify Louisiana’s currently complex tax system in order to “foster an environment where businesses want to invest and create good-paying jobs.” To ensure that the proposal is revenue neutral, Jindal proposes to raise sale taxes while keeping those rates as “low and flat” as possible.
  • Kansas: Emboldened by the previous legislative year’s successful income tax rate reduction and an overwhelmingly supportive legislature, Kansas Gov. Sam Brownback laid out his plans to further lower the top Kansas state income tax rate from the current 4.9% to 3.5%. Eventually, Brownback dreams of completely abolishing the income tax. “Look out Texas,” he chided during last week’s State of the State address, “here comes Kansas!” Like the other states that are aiming to lower or remove state income taxes, Kansas would make up for the loss in revenue through an increased sales tax. Bonus points for Kansas: Brownback is also eying the Kansas mortgage interest tax deduction as the next to go, the benefits of which I discussed in my last post.

These plans for reform are as bold as they are novel; no state has legislatively eliminated state income taxes since resource-rich Alaska did so in 1980. It is interesting that the aforementioned reform leaders all referenced the uncertainty and complexity of their current state tax systems as the primary motivator for eliminating state income taxes. Seth Giertz and Jacob Feldman tackled this issue in their Mercatus Research paper, “The Economic Costs of Tax Policy Uncertainty,” last fall. The authors argued that complex tax systems that are laden with targeted deductions tend to concentrate benefits towards the politically-connected and therefore result in an inefficient tax system to the detriment of everyone within that system.

Additionally, moving to a sales tax model of revenue-generation may provide state governments with a more stable revenue source when compared to the previous regime based on personal and corporate income taxes. As Matt argued before, the progressive taxation of personal and corporate income is a particularly volatile source of revenue and tends to suddenly dry up in times of economic hardship. What’s more, a state’s reliance on corporate and personal income taxes as a primary source of revenue is associated with large state budget gaps, a constant concern for squeezed state finances.

If these governors are successful and they are able to move their states to a straightforward tax system based on a sales tax, they will likely see the economic growth and increased investment that they seek.

Keep an eye on these states in the following year: depending on the success of their reforms and tax policies, more states could be soon to follow.

New Research on Streamlining Commissions

Tomorrow I’ll be at the Association for Public Policy Analysis and Management Fall Research Conference to present research on streamlining commissions with Carmine Scavo. Carmine and I have written one paper developing a methodology for studying these commissions, and we’re now working on case studies of commissions in nine states.

Well over half of states have appointed one or more streamlining commissions in efforts to find budget savings or to improve state programs. We’re studying streamlining efforts in California, New Mexico, Louisiana, Alabama, Colorado, New York, Maine and Virginia. We hope to get an idea of how effectively these commissions have reduced the size of state government and found efficiencies in existing programs. We also hope to identify the characteristics that make commissions most likely to meet their goals.

In our first paper, we hypothesized that commission success would depend on the following characteristics:

1) clearly defined objectives regarding their final product;

2) a clear timeline for this deliverable with an opportunity to publish interim advice. Preliminary findings indicate that the commission should have at least one year to work;

3) adequate funds to hire an independent staff to study some issues in depth;

4) a majority of the commission members from outside the government. The commission chair certainly should be from outside the government in order to help to get around the challenges that inherently restrict the ability to find streamlining opportunities while working in government. Preliminary findings indicate that representatives from the state legislature and administration should be involved as a minority of the membership to ensure that the commission’s recommendations have buy-in from policymakers.

So far, our research indicates that funding for commissions may not be as important as we’d though. Some commissions have achieved successes with essentially no budgets while others that were well-funded developed recommendations that didn’t go anywhere.

Tomorrow we will be presenting our preliminary findings on the California Commission on the 21st Century Economy, the Colorado Pits and Peeves Roundtable Initiative, and the Virginia Commission on Government Reform and Restructuring. Once we finish this research I will write up our findings in more depth here. If any of you will be attending the APPAM conference, I hope to see you there.

Hamilton’s Paradox

I recently finished reading Jonathan Rodden’s 2006 book Hamilton’s Paradox: The Promise and Peril of Fiscal Federalism. The book provides a fascinating analysis of fiscal federalism that combines theory, qualitative and quantitative analysis, and contemporary case studies.

Rodden begins by detailing the potential promises and perils of fiscal federalism. He states that the promise of federalism is straightforward: “decentralized, multitiered systems of government are likely to give citizens more of what they want from government at lower cost than more centralized alternatives.” The perils of federalism, although less examined in the literature, are rooted in the idea that “In decentralized federations, politically fragmented central governments may find it difficult to solve coordination problems and provide federation-wide collective goods. As in the private sector, public institutions only produce desirable outcomes when incentives are properly structured” (p. 5).

In Chapter 3 Rodden provides a very interesting history of federalism and federal bailouts in the U.S. Specifically, he discusses the federal assumption of state debt that took place in 1790, the rapid growth in state borrowing in the early 1800s, the nine states that defaulted in 1841 and 1842 (Maryland, Pennsylvania, Arkansas, Florida, Illinois, Indiana, Louisiana, Michigan, and Mississippi), and the constitutional debt limitations that many states adopted in the 1840s and 1850s.

Most interesting is the game theory model Rodden develops in the second half of Chapter 3. Specifically, it’s a dynamic game of incomplete information that takes place between the central government and a single subnational government. Information is incomplete because subnational governments don’t know exactly how the central government will behave in the event of fiscal crisis. That is, the central government will either allow the subnational government to default (resolute type) or will provide a bailout (irresolute type).

The fist move of the game occurs when a subnational government experiences a fiscal shock with lasting effects (i.e. recession). In response to the fiscal shock it can either adjust immediately or refuse to deal with the shock by borrowing, with the long term hope of receiving a bailout. The path that the subnational government takes is a function of, among other things, the expected probability of the central government being resolute or irresolute (the complete game is much more detailed than the brief description provided here).

Rodden utilizes this game as he develops each of the case studies provided later in the book. The case studies involve comparing and contrasting the events that have taken place in Germany and Brazil. In the 1990’s two states in Germany received formal bailouts by the federal government (the Bund). During the same time, however, bailouts were distributed to virtually every state in Brazil. In Chapters 7 and 8 Rodden carefully details the structures of government in these two countries and outlines the reasons their outcomes were so different.

Two of the many important conclusions that Rodden makes in this book are (1)

when free to borrow, growing transfer dependence is associated with increasing deficits, both among federated units and local governments (p. 116)

and (2)

The central government must not only allow subnational governments significant tax autonomy and disentangle its books from those of the subnational governments, but it must demonstrate through costly action that it will not assume subnational liabilities when times get tough (p. 267)

This brief review of Hamilton’s Paradox only covered a few of the many important topics that the Rodden details in the book. I strongly recommend this book for anyone interested in fiscal federalism.

A Balanced Budget Amendment: Not so Far-Fetched

The Alexandria News reported last week that Virginia Governor McDonnell sent the General Assembly a resolution for their consideration. If passed, it would be one step toward enactment of a federal balanced budget amendment.

Remember, there are two ways to amend the Constitution. One option is for two-thirds of each federal chamber to pass it and then forward it to the states where three-fourths need to ratify it (by convention or by the legislature). This is the way all 27 amendments to the constitution have been passed. The second—so-far unused—option is for the states to get the ball rolling by calling a convention: If two-thirds of them petition Congress for a constitutional convention, then a convention must be called. It will then consider an amedment (or amendments) and if it can agree, forward these back to the states where, again, three-fourths must consent to passage.

The Virginia bill would take a stab at both methods. It calls on Congress to pass a balanced budget amendment. But, “in the event of congressional inaction,” it petitions Congress for a constitutional convention.  

The idea is not so far-fetched. After all, there have been 17 amendments to the Constitution since the Bill of Rights, which comes to around one amendment every 13 years. The most-recent took effect 19 years ago in 1992. Moreover, in 1995, the U.S. Congress came razor-close to passing a balanced-budget amendment, obtaining the requisite two-thirds of House votes and falling just one vote shy of two-thirds of all senators.

What is more, we are actually closer to the second means of amending the Constitution than you may think. David Primo writes (p. 130):

In the 1970s, thirty-one states called for a convention on the subject of a balanced budget, and Missouri did so in 1983. Since then, three states (Alabama, Florida, and Louisiana) have rescinded this request, though it is unclear whether they can do so. Depending on how the counting is done, then, only two to five more states are needed for a convention to be called.

The Backdoor Bailouts

The Washington Post reports:

States that have borrowed billions of dollars from the federal government to cover the soaring cost of unemployment benefits would get immediate relief from the Obama administration under a plan to suspend interest payments for the next two years.

According to White House Press Secretary Robert Gibbs, the President’s proposal, “prevents future state bailouts, because in the future, states are going to have to rationalize what they offer and how they pay for it.” I’m not convinced.

First, a little background:

The unemployment system is jointly administered by the states and the federal government. To finance the program, both states and the feds tax the first $7,000 of wages paid to each worker, while some states choose to tax income earned beyond that first $7,000.

As the Post reports:

In tough times, states routinely borrow from the federal government to pay benefits. But when states have an outstanding balance for at least two years, federal law triggers an automatic increase in the federal tax to repay the loan. Such tax hikes already have taken effect or are imminent in Michigan, Indiana and South Carolina.

What the Post doesn’t mention (but Bloomberg does), is: “From 2009 until this year, the loans had been interest-free under a provision of the economic-stimulus program.”

Now the President wants to go further, suspending any interest payments the states owe to the federal government for the next two years. In 2014, he would then change the tax base so that instead of taxing the first $7,000 of wages, the feds and the states would each tax the first $15,000. 

It is this aspect of the proposal that the press secretary, evidently, believes “prevents future state bailouts.” This might be true if we assume that policy makers won’t respond to the extra tax revenue by increasing spending. But more fundamentally, it seems to me that the press secretary is glossing over the fact that the first part of the plan—suspension of interest payments—is a bailout.

For historical context, I turned to Robert Inman. In the first chapter of Fiscal Decentralization and the Challenge of Hard Budget Constraints, he writes (p. 57):

The first major wave of lower government defaults occurred during the 1840s, when eight states (Arkansas, Illinois, Indiana, Louisiana, Maryland, Michigan, Mississippi, and Pennsylvania) and the Territory of Florida defaulted.

Maryland Representative William Cost Johnson (you can’t make that name up!) led the effort. As Inman explains, the rest of Congress didn’t agree with Mr. Cost; they refused to bail out the states (p. 57):

Importantly, opponents of a bailout stressed the strategic implications of such a policy; bailouts would signal an accommodating central government and encourage future deficits, defaults, and ultimately inefficient local governments. Congress said no, and there have been no state defaults since.

This marked a turning point in federal-state relations: through recessions, depressions and countless state fiscal crises, the strong no-bailout rule has survived nearly two centuries.

This made the US federal system unique. Unlike local governments in other countries, US states could not run up huge bills and export the costs to their neighbors. As Inman explains, other countries are not so fortunate to have such a strong no-bailout rule (p. 35):

The recent financial crises in Argentina and Brazil, largely precipitated by excessive local government borrowing, are prominent recent examples of how a fiscally irresponsible local sector can impose significant economic costs on a national economy.

The strong no-bailout rule in the US, however, has not prevented the federal government from increasing its role in state finance. Over the years, federal grants to state governments have steadily grown. Now, there are over 1,120 federal programs that are designed to aid the states. Today, federal funding now pays for nearly 1/3rd of all state spending.

What I find particularly alarming, however, is the recent growth in ad hoc state aid programs that are designed to offset short-term fiscal crunches. To me, these look an awful lot like bailouts. Consider the $135 billion in state aid in the stimulus which included:

  • A state fiscal stabilization fund designed to shore up deficits
  • A temporary increase in the federal Medicaid matching formula (FMAP)
  • Grants for various local projects from teachers to firefighters to police
  • The aforementioned interest-free loans for unemployment insurance
  • And much more

On top of that, the President successfully lobbied for an extension of the “temporary” FMAP increase and an extension of the federal-state unemployment insurance program (he was less-successful in last summer’s attempt to wrangle another $50 billion in state and local aid).

If somehow they could see this, I suspect that the senators and representatives who stopped a state bailout over 170 years ago might wonder if their “no bailout” stance really still stands.

The States and Too Big to Fail

Bloomberg reports:

U.S. House members are returning to Washington from summer recess to act on a $26 billion plan to aid cash-strapped state governments.

The U.S. government has a long history (see pp. 57-60) of refusing to bailout profligate state governments. It dates all the way back to the 1840s when eight state governments (and one territory) came to Congress with hats in hand: Arkansas, Illinois, Indiana, Louisiana, Maryland, Michigan, Mississippi, Pennsylvania, and the territory of Florida all wanted a federal bailout of their debts. Representatives from fiscally responsible states would have none of it and an important precedent was established. There have been no state defaults since.

Today’s action is not a full state bailout (as far as I know, none of the states are threatening bankruptcy just yet), but the federal assertion that the states are too big to fail does mean that they will face a significantly softer budget constraint tomorrow than they did yesterday. That is: the states have a weaker incentive to be fiscally responsible.

How might we expect the states to behave in this post-bailout world? 

In recent research, Alexander Fink and Thomas Stratmann of George Mason University shed some light on the question. It would be nice to just compare the performance of states that receive federal aid with that of states that do not. But the states that receive federal aid are not random. In all likelihood, they are probably mismanaged to begin with (or perhaps poorer to begin with). In any case, a simple analysis of those that receive aid may not tell us much about the bailout effect itself.

Fink and Stratmann untangle this causal relationship, however, with a clever technique. They look at the German upper chamber, where different states enjoy different levels of political influence. Because political influence makes a state more likely to receive a bailout and because it is unrelated to the states’ underlying fiscal management, this allows Fink and Stratmann to test for the impact of the bailout without accidentally picking up other influences. What do they find?

States with a softer budget constraint [i.e., greater expectation that the German national government will bail them out], have higher deficits and debts and receive more bailout funds.

Furthermore:

The larger the expectation of a bailout, the higher the amount spent in a number of spending categories, and special interests are most likely to benefit from this additional spending. We also find that bailout expectations lead to less efficient state government service provision. 

One wonders if Congress is doing the states any favors.

The State of Laziness

According to Bloomberg, here are the top ten laziest states:

Louisiana, Mississippi, Arkansas, North Carolina, Tennessee, Kentucky, West Virginia, South Carolina, Alabama, Delaware.

(I have no idea whether this survey method is valid).

Though it is provocative to label the good people of Louisiana “lazy,” I suspect that much of the observed difference in behavior can be traced not to inherent differences in the people but to differences in the institutions in which those people operate: the laws, the economy, the culture, etc. that constrains and shapes their actions.

A few years back, the Nobel laureate economist Ed Prescott (of Arizona State) analyzed the difference between American and European working habits. There was a time, in the early 1970s, when Europeans worked more than Americans. Now this is reversed: “Americans work 50 percent more than do the Germans, French, and Italians.” Prescott finds that differences in marginal tax rates are the predominant factor. So Europeans aren’t any lazier than we; they just face different incentives.

I wonder what institutional differences can explain differences in work effort across the U.S. states?

One can’t help but notice the over-representation of the South. Two centuries ago, Montesquieu wrote:

You will find in the climates of the north, peoples with few vices, many virtues, sincerity and truthfulness. Approach the south, you will think you are leaving morality itself, the passions become more vivacious and multiply crimes… The heat can be so excessive that the body is totally without force. The resignation passes to the spirit and leads people to be without curiosity, nor the desire for noble enterprise.

I seem to recall a similar observation from John Adams, but can’t locate it just now…or maybe I just don’t want to put in the effort to find it.

Hurricane Season Begins

Today is the first day of the 2010 hurricane season, which NOAA predicts will be more active than usual, with 14 to 23 named storms. (In fairness, NOAA has been way off the mark in recent years, to the relief of the residents of the Gulf and Atlantic coasts.)

The Mercatus Center’s Gulf Coast Recovery Project has put out over 50 studies since 2005 looking at the rebuilding of the Gulf Coast after Hurricane Katrina. Below are links to eight studies that state and local policy makers may find useful today and in the coming months.

  • A Policy Maker’s Guide to Effective Disaster Preparedness and Response. In the years since Hurricane Katrina devastated the Gulf Coast region of the United States, scholars, policy makers, and concerned citizens have been working to understand what exactly went wrong in the response to the event and how better to prepare for future natural disasters. Post-Katrina New Orleans presents a unique opportunity to study how and how not to undertake the rebuilding of a major population center after such a catastrophe. Proper study of this subject, if conducted objectively and rigorously, will not only save other communities countless dollars but will also save lives.
  • Building a Safe Port in the Storm: Public vs Private Choices in Hurricane Mitigation. This Policy Comment analyzes the connection between hurricane mitigation and insurance. As many people fail to purchase government-subsidized flood and earthquake insurance, some researchers argue that market failure explains the lack of mitigation. But empirical evidence shows that markets do value natural hazards risks, including hurricane mitigation, and thus the case for market failure has been overstated.
  • The Entrepreneur’s Role in Post-Disaster Community Recovery. This Policy Primer recommends that in the aftermath of a disaster, government relax non-disaster regulations in order to allow entrepreneurs, who are in the best position to assess local conditions and needs in the rapidly changing, post-disaster environment, to step in and quickly respond to the community’s needs.
  • The Road Home: Helping Homeowners in the Gulf Post-Katrina. This comment explores Road Home’s policy goals and design, placing them in the context of the destruction wrought by the hurricanes and the role of insurance and government before and after a disaster. It then contrasts Road Home’s goals and design with the policy goals and design of Mississippi’s Homeowner Assistance Program.
  • Disastrous Uncertainty: How Government Disaster Policy Undermines Community Rebound. This Policy Comment looks at the ways in which public policy has had negative unintended consequences on the ability of communities to make informed decisions about sustainable rebuilding after Hurricane Katrina.  Based on fieldwork, the authors explain why social capital and signals generated by market and civil interactions are important to recovery efforts and how policy makers can encourage rather than retard grassroots rebuilding efforts.
  • Making Hurricane Response More Effective: Lessons from the Private Sector and the Coast Guard During Katrina. Many assume that the only viable option for emergency response and recovery from a natural disaster is one that is centrally directed. However, highlighted by the poor response from the federal government and the comparatively effective response from private retailers and the Coast Guard after Hurricane Katrina, this assumption seems to be faulty. Big box retailers such as Wal-Mart were extraordinarily successful in providing help to damaged communities in the days, weeks, and months after the storm. This Policy Comment provides a framework for understanding why private retailers and the Coast Guard mounted an effective response in the Gulf Coast region.
  • Ensuring Disaster: State Insurance Regulation, Coastal Development, and Hurricanes. This policy comment examines how state insurance regulation affects societal vulnerability to hurricanes. States provide insurance for high-risk properties at below market rates primarily through insurance pools. Seven states, including Louisiana and Mississippi, have wind pools, with over 1.8 million policies and a total liability of over $500 billion as of early 2007. Wind pools are financed, in part, through additional charges on other citizens’ premiums throughout the state to cover excess losses from hurricanes. State guaranty funds, which ensure payment of claims of insolvent insurers, also subsidize high-risk properties.

For more information about these studies or to request hard copies, feel free to email me using the link here.