Tuesday, September 27, 2005

After Katrina - What Didn't Happen - Update

I predicted several weeks ago that satellite TV would considerably outperform government departments in providing services to hurricane victims sooner, faster and better. I picked satellite TV to illustrate the different private, decentralized and collective, centralized decision-making processes totally at random, but it turns out that if you subscribe to the Wall St. Journal you can read all about how quickly EchoStar has not only reconnected old but signed up new customers.

Monday, September 26, 2005

How Richard Nixon Invented Hispanics

In a press release in 2003, the Bureau of the Census announced with great fanfare that "Hispanics" had become the largest minority group in the U.S. As they are also at great pains to clarify, Hispanics, unlike "blacks" and "Asians," are not a "race.".

And yet they must be something, else no one would pressure the government to count them. And the story of how something called "Hispanics" came to be an objective reality worth measuring is a fascinating lesson in the economics of tribal self-identification. "Hispanics" are readily identifiable in the U.S. But as soon as one crosses the Rio Grande from the north there is no such thing as "Hispanic." There are instead races: "whites," and "Indians," and mestizos, and "blacks," and all of the above together. And there are nationalities: Dominicans, and Salvadorans, and Hondurans, and Mexicans and Brazilians. But in the United States these disparate nations and people, who sometimes go to war at least proximately because of soccer games and who argue over the racial stereotyping in their television soap operas, through the waving of a bureaucratic wand in an obscure office at the end of an obscure hall in Washington magically become a single demographic group. So too with "Asian," whose official definition as of 2002 was a masterpiece of bureaucratic obfuscation masquerading as clarification:

"Asian" refers to those having origins in any of the original peoples of the Far East, Southeast Asia, or the Indian subcontinent including, for example, Cambodia, China, India, Japan, Korea, Malaysia, Pakistan, the Philippine Islands, Thailand, and Vietnam. "Pacific Islander" refers to those having origins in any of the original peoples of Hawaii, Guam, Samoa, or other Pacific Islands. The Asian and Pacific Islander population is not a homogeneous group; rather, it comprises many groups who differ in language, culture, and length of residence in the United States. Some of the Asian groups, such as the Chinese and Japanese, have been in the United States for several generations. Others, such as the Hmong, Vietnamese, Laotians, and Cambodians, are comparatively recent immigrants. Relatively few of the Pacific Islanders are foreign born.


The immigrant from China or Korea on the one hand and Japan or Vietnam on the other must be mystified that, when he arrives in the U.S., he is placed in the same demographic category as those whose genetic lineage is traced to countries recently at war with his own. But such is the nature of tribal politics in the U.S. (and, because of its influence, in other multi-tribal Western democracies too) these days. Everyone must be pigeonholed, the pigeonholing must be by physical appearance, and the government will tell you which compartment is yours.

This is all an artifact of decisions taken during the first Nixon Administration. The terms "Hispanic" and "Asian/Pacific Islander" have their origins in a term first placed on the 1970 Census form during the Nixon Administration, and sought in the case of "Hispanic" to unite those with nothing in common other than backgrounds vaguely related to countries where the Spanish language is important. It is not strictly a geographic term, identifying people from Latin America and the Caribbean. While Dominicans, who speak Spanish, and Brazilians, who speak Portuguese, are Hispanic, Haitians, who speak French and Creole, and Jamaicans, who speak English, are not. (And whether this vague type of person should be called "Hispanic" or "Latino" is an absurd and impenetrable controversy all its own.) The decision to invent Hispanics has had profound effects on American culture.

In any society (certainly including ours) where people can organize to pressure the government to transfer income from other groups to theirs, the question arises of what shared characteristics to organize the group around. People can organize around vague notions of race (the NAACP or La Raza), around occupation (small-business owner or farmer), around whether they are left- or right-handed, or any other criterion. But the criteria around which they do choose to organize is, in the economic way of thinking, a function of the marginal costs of organizing each type of group. One reason labor unions are such a powerful force in many societies of all income levels and many forms of governments is that they are easy to organize, with many of the potential constituents converging to the same workplace every day. Groups organized around tribe form relatively easily as well because it is easy to tell who is and is not a member, and the tendency of people to socialize based on common language, church membership or other criteria also lowers these organizational transaction costs.

But what is striking about recent years is the ability of government decisions to create artificial identities. This is in part presumably because in a democratic political system bigger numbers, other things equal, can mean bigger influence. The notion of what it means to be "white" has itself undergone dramatic transformation over time. The term once connoted primarily northern Europeans – people descended from residents of the British Isles, Scandinavia, (non-Jewish) Germany, and the like – with those considered eminently “white” now – people with last names like Rosselli and Papadopoulos – previously consigned to a sub-"white" basement, not quite "black" but not quite Smith or Johnson either.

To get a sense of how artificial it all is, note that some Japanese consider Persians and Arabs to be "white," something utterly preposterous to many people who actually call themselves "white." Are Jews “white”? They are now, but once upon a time they were not. The media sometimes acts as if, because of their successful integration (which "Hispanic" immigrants are rapidly duplicating)," "Asians" already are. When the government is counting people, President Bush’s first-term Labor Secretary nominee, Linda Chavez, is “Hispanic.” But when she is asked to serve in government, she is, because the “Chavez” in “Linda Chavez” comes from her ancestors who came to New Mexico from Spain in the 1600s, not Hispanic enough.

By defining phenomena called "Hispanic" and "Asian," the government of the U.S. is subsidizing a particular basis for both tribal identification specifically and presure-group formation more generally. What makes this arbitrariness so troubling is the ability of the state through its decisions to promote tribal tensions that might otherwise not be there. Imagine a hypothetical American named John Kim. He is the native-born grandson of Korean immigrants, an accountant, the married father of three children, a Roman Catholic, a Dallas Cowboys fan, and a bowler. So what is he? If asked, he would probably define himself by all these criteria simultaneously. But in modern America, with tribal identity more and more the primary engine of political engagement, he is probably inclined to think of himself primarily as Korean or, even more artificially, as "Asian." And so when bad things happen to him in life he may be more likely to think that it is a result of his "Asian-ness" rather than to the rain that occasionally falls on all of us. By inventing Asians and Hispanics/Latinos, President Nixon subsidized the organization out of thin air of a brand-new ethnic identity, and the creation of "Asian" and "Hispanic" pressure groups in every sphere of American life has proceeded correspondingly. That is too bad, because accountancy and bowling are aspects of identification over which one has control, while tribal identities are encoded in the genes and therefore more difficult to overcome. When society divides along tribal lines, it becomes harder to reconcile competing factions than when they are divided along lines not so easily transmitted from parent to child.

Richard Rodriguez, in his wonderful book Brown, wonders how long it takes a Bolivian immigrant to become a "Hispanic." He argues that when she arrives she will be thrown in with "...Mayan Indians from the Yucatán,…Argentine tangoistas, Colombian drug dealers, and Russian Jews who remember Cuba from the viewpoint of Miami." He offers the following definition of this only-in-America term:

Hi.spa.nick 1. Spanish, adjective. 2. Latin American, adjective. 3. Hispano, noun. An American citizen or resident of Spanish descent. 4. Ducking under the cyclone fence, noun. 5. Seen running from the scene of the crime, adjective. Clinging to a raft off the Florida coast. Elected mayor in New Jersey. Elevated to bishop or traded to the San Diego Padres. Awarded the golden pomegranate by the U.S. Census Bureau: “most fertile.” Soon, an oxymoron: America’s largest minority. An utter absurdity: “destined to outnumber blacks.” A synonym for the future (salsa having replaced catsup on most American kitchen tables). Madonna’s daughter. Sammy Sosa’s son. A jillarioso novel about ten sisters, their sorrows and joys and intrauterine devices. The new face of American Protestantism: Evangelical minister, tats on his arm; wouldn’t buy a used car from. Highest high school dropout rate; magical realism.


Rodriguez is writing approvingly of a society where tribal identity is becoming more confused, making the old categories less relevant and the new ones more dynamic, shorter-lived and hence more interesting. This will be true as long as he has not underestimated the power of tribal subsidy (e.g., via the census form, or tribal preferences in university admissions, tribal appeals by politicians running for office, etc.) to define the relative rates of return to the various ways of defining ourselves. One could suppose that the moral ideal of a multi-tribal society is that it become a post-tribal society, one where tribal identity is utterly irrelevant in how we trade and how we vote. (At least on religious grounds, it’s not clear that tribe would or should become irrelevant in how we marry, but on ethnic grounds perhaps it should.) And, given the rate at which our immigrants, who are the world in miniature, are living, working, marrying and conceiving inter-tribally, it is possible that the emotional and material benefits of annihilating tribal lines will override the political incentives and, occasionally, biological urges to build them up. Possible, but no sure thing. It is a race between those who are taking hammers to the walls and those who are for their own reasons busy building them.

Thursday, September 22, 2005

Would Edmund Burke Bat Alex Rodriguez Leadoff?

To a knowledgeable baseball fan for any manager to do that seems preposterous. But in recent years people have suggested that, mathematically, to maximize run production the leadoff hitter should be the team’s best hitter, primarily because he will get more at-bats. A piece excerpted here makes a similar suggestion that the optimal lineup (in order to maximize run production) is to put players in the lineup in descending order of on-base percentage (OBP). So as of today the Yankees would put Jason Giambi in the leadoff spot and have Alex Rodriguez bat second. Both of these players are known mostly for their ability to hit home runs and doubles. (If you are not a baseball fan, OBP refers to the percentage of times a player comes to the plate that he ends up on-base via a hit or a walk.) There is in fact a baseball computer game called Out of the Park Baseball where the programming is such that often a power hitter is inserted automatically into the leadoff slot.

But that is not the way baseball managers fill out their lineup cards. They put speedy guys who walk a lot and don’t strikeout at the top of the order. If a player gets on a lot but also hits a lot of home runs, he will bat third, fourth or fifth, the theory being that he will be more productive that way because it’s more likely that the top two guys in the lineup will be on base when he comes up. If the power guy bats first, a lot of those big hits come with the bases empty. Managers will tell you that that is the way it has always been done, and therefore that’s the only way that makes sense.

Sports is often a window into economics, and society more broadly, and this controversy between the number-crunchers – people who claim to have discovered a new way to do things that is superior to the traditional way – and the people with life-long experience in the game is surprisingly instructive. Managers who stick with the established way of filling out their lineup card are, in essence, bowing to the implicit wisdom of tradition. And it turns out that this is a well-developed theme that has huge implications for the ability of reason powered by the state to cultivate desirable social change.

In a fascinating article for people interested in the history of ideas, Linda Raeder has attempted to philosophically unite Edmund Burke, the conservative’s conservative, and the 20th-century libertarian (as he would now be called) Friedrich Hayek. Burke was Irish by birth but a pillar of the British establishment. He is best known for his scornful criticism of the French Revolution, in which in a span of just a few years the long-established French order was overthrown and replaced by the scions of the French Enlightenment, people who believed that human reasoning was the only proper guide to the conduct of state affairs and to the proper construction of the social order. Perhaps the low ebb of this movement was when Notre Dame Cathedral was taken over, heavily vandalized and turned briefly into a shrine to the cult of Reason. To Burke, human tradition had wisdom locked within it, wisdom that was indiscernible to the person assessing the tradition decades or centuries later, but was no less true because of the ignorance. We might privilege marriage among other types of family structures, for example, because it has long been that way in most places. To overturn tradition because we are smarter now than they were then and can use reason to plot a better future, is to throw away that implicit reason. It is therefore to cultivate disaster.

When the best-laid plans imposed on an impossibly complex society fail to work out as planned, the planner blames the rebellious disobedience, abject incompetence or conspiratorial subversion of his subjects, rather than the farcical difficulty of trying to figure in detail out how millions of humans will react to his plan. The disobedient then must be made to obey the plan, which is beyond criticism. The plan leads to chaos, and the chaos then leads naturally enough to the Terror and the guillotine. He didn’t live to see it, but the many tens of millions killed by twentieth-century Communism, another form of governance built on historical inevitability flawlessly deduced by those in power, would have struck him as unsurprising.

Hayek believed in upholding tradition for the same reasons Burke did. But Hayek advanced the argument by conceding the possibility of progress, of new ways of organizing society replacing older ways. But progress happened not because of some plan reasoned out and imposed from above, but from social experimentation conducted from below. When new social arrangements were tried, and worked to create results that people valued, they would come to triumph over old without any push from above. Thus we get the replacement of village-dominated societies with urbanized ones, the rise and (to the extent they are not protected by the government) fall of labor unions, the development (and, perhaps, the ultimate demise) of the multinational corporation, the decline of the extended family, and countless other examples. In the Hayek view people should be free to experiment, but the government should favor none.

The savvy baseball manager refuses to bat his 40-home run guy leadoff because he knows that’s not what you’re supposed to do, no matter what the computer guys tell him. More generally the conservative believes, for the same reason, that you don’t use the state to overthrow established traditions. You don’t, for example, subsidize alternatives to the traditional nuclear family. That it is so prevalent and so longstanding suggests that there is great social value to it, and to cultivate its erosion is madness. If it fades away on its own fair enough, but to erode it from above is to risk a lot. To the conservative mind, those who are confident that such legislative engineering yields “progress” are not sufficiently humble about their own limitations in a world where a lot of important information is contained deep within society, unobservable to its members but no less important for its invisibility. Contrary to what many believe, what animates conservatism is not social Darwinism, but humility about human reason, and cognizance of the capacity of leaders to do terrible things when their grand plans don’t work out the way they thought they would.

Friday, September 16, 2005

Old Europe at the Crossroads

The heart of Old Europe appears to be at a critical juncture. On Sunday German citizens will vote in national elections. The favorite is the CDP candidate Angela Merkel, who, despite or perhaps because of her East German background, is said to be in favor of economic reform.

The German elections are the second of three over the course of a year where reform of sclerotic economies to make them consistent with the rudely unavoidable demands of globalization is a primary issue. In the first election last week, Japan’s Liberal Democratic Party (driven really not by the party ideology that usually rules in parliamentary systems, but by the charisma and obstreperousness of their leader, Junichiro Koizumi) coasted to a big victory. Now it is Germany’s turn, and next year it will be France’s. In that case the nominal reformer, Nicolas Sarkozy, who pledges to fundamentally remake the French social model, will vie against the foppish Dominique de Villepin, who pledges in essence to tinker with the French model to protect it from Anglo-American economic barbarism. And these two candidates will also have to compete against the candidate(s) of the French left, and of the National Front, all of which favor even less accommodation to the world’s demands for more flexible economies less burdened by the anvil of the welfare state.

Old Europe – and here I mostly mean the heart of the mother continent, France, Germany and Italy – labors under the illusion that the “European model” of which it is so proud is sustainable in a world full of hard-charging people in the U.S., China, India, Mauritius, Chile, and more or less everywhere who are simply willing to work on (dramatically) better terms than the Europeans are willing to offer. Some Europeans, including many of the young ones, realize this, but I doubt whether it is enough. In any event, for Germany and France this is a moment of truth. The economic data for these countries is notable not just because it is bad, with unemployment rates hovering around ten percent, but because it has been so bad for so long. According to World Bank data, France, Germany and Italy have had unemployment rates exceeding eight percent without interruption since 1983, 1994 and 1982 respectively. These are long-term, systemic, social cohesion-corroding levels of economic dysfunction. If reform does not happen in the wake of these elections it is probably not going to happen at all.

And I suspect that they will not happen. Even if those pledged to reform win, the willingness to reform is not great. Prime Minister Berlusconi is pledged to reform, but finds that it has been difficult to bring his country with him. It may take the threatened separation of the more prosperous north of that country to bring change, and even that may not be enough.

Old Europe’s young disproportionately bears the pain of the European social model. They are with disturbing frequency separated for years at a time from the labor force in their 20s, when investments in human capital from job experience are most lucrative, because of chronic unemployment. But they are more and more outnumbered by older Europeans, who benefit from the lavish retirement, pension and vacation schemes and are thus reluctant to change them. As Europe gets older electoral demography will more and more work against reform. The consequences of continued refusal to change combined with the increasing costs of that refusal may be grim. At a minimum, Europe may lose more and more of its best, brightest and most ambitious to the U.S., where their future can be more in their own hands. This trend has been (mostly anecdotally) discussed in the current issue of the American Enterprise. It is possible, though far from certain, that old Europe’s difficulties could manifest themselves in a more sinister way, which is a topic for another day.

The example of Japan provides some possibility of hope, but the Japanese are not nearly as emotionally invested in the welfare state as the Europeans are; there is no “Japanese social model” that the Japanese wish to export to the rest of the world. The combination of belief in the European model in a world that is passing it by and the increasingly grim electoral arithmetic make true reform unlikely. But we will know better soon after next year’s French elections.

Monday, September 12, 2005

What Didn't Happen After Katrina

The seemingly disastrous response by all levels of the U.S. government to Hurricane Katrina is all over the media. The media are magnetically drawn to bad news, and so naturally if one relies on them too much one can miss important stories. One such story is, despite its disastrous localized impact, how little the storm affected the rest of us.

The storm was, in economic terms, an alteration of the production technology. Tasks that could be achieved at relatively low cost – converting resources into gasoline and then distributing them to consumers around the country, matching the wares of battery manufacturers with the desires of consumers to pay for those wares, transporting people into and out of the stricken area – suddenly became much costlier. The different ways that decentralized, property-rights based decision-making – the market – and collective decision-making – the state – responded to this disturbance are worth noting. Despite facing the same trauma, the former did an extraordinary job in reacting to the disaster, while the latter’s response left something to be desired.

Katrina apparently temporarily took out between five and ten percent of U.S. gasoline production. This raises two problems – getting production back online and deciding in the meantime who will get the gasoline that remains. Both of these problems were solved with what must be considered astonishing effectiveness. Contrary to the worst predictions (some of which were believed by drivers who, irritatingly, crowded gas stations to make sure they had a full tank at all times), there were no meaningful shortages of gasoline in most places. It is true that there were lines and empty gasoline stations in some areas of the Southeast (partly due to damage to a pipeline that served Atlanta and the surrounding areas), but it is striking how fleeting they were. Apart from the storm-stricken area itself, gasoline was available almost immediately to anyone, provided they were willing to pay the price.

And that is part of the story too. When there is less gas than people expected there to be, some way has to be found of deciding who gets it and who doesn’t. And in this country we rely on the price system and property rights to decide that question. The Energy Information Administration keeps track of gas prices. Between 8/29 and 9/5 prices rose sharply for regular, more in some places than in others:

Region8/299/5
New England2.603.23
Central Atlantic2.613.29
Lower Atlantic2.573.11
Midwest2.603.03
Gulf Coast2.532.91
Rocky Mountain2.582.98
West Coast2.743.03



As an aside, these data make it difficult to accept a charge of post-Katrina “gouging” by those who produce gasoline. Imagine a map of the U.S., and superimpose on it an expanding tree of lines away from the Gulf Coast, with each line representing a potential supply chain for gasoline, with each node generating two or three or four more heading in all directions. The region in the eastern half of the U.S., one supposes, is for transport-cost reasons where most gasoline from Gulf oil ends up. The Northeast is the region within that subset of the country where the path to market is most complicated, precisely because the distance from refineries and wells is greatest. It is not surprising that these regions saw very high price increases. Indeed, one might have supposed that gougers would have stuck it to Gulf residents the most, since they were the most immediately desperate, but in fact that region saw the lowest price increases. There were also relatively modest effects in the West, where more oil may come from Mexico and Alaska.

Is that what happened? I don’t know, but I don’t have to. The reworking of the gasoline supply network and the decisions on who should and shouldn’t get gasoline after a Category 4 hurricane slams into the biggest oil production and refining region of the country is a tremendously complicated task. If I, or for that matter anyone, were asked to do it alone by giving orders to various Americans the results would be comical. But oil companies, to stay in business, must provide their products to people who want them at the profit-maximizing price. If one company doesn’t, another will. This means that each company employs thousands of individuals who possess knowledge about supply routes, how demand varies by region, and all sorts of other important microeconomic information. Someone knows the things they need to know. When given some autonomy to make use of that information (and when compensated accordingly for its value), they have the proper incentives to get gas production back quickly. The only thing they require is the freedom to set the terms under which consumers will be free to buy or not buy their product. By raising their prices, they force consumers to decide which uses of gasoline – taking two cars instead of one, combining trips or not, carpooling or not, upgrading to a more fuel-efficient but more expensive truck fleet or not, buying that hybrid or not – are worth the prevailing price and which are not. By allowing producers the freedom to set prices, this reallocation of suddenly scarcer gasoline took place in the most effective manner possible. People nationwide were allowed, after making different arrangements reflecting new conditions of scarcity, to continue living their lives and relying on gasoline to do the things they find it worthwhile to do. The contrast with the 1970s, when price controls and a massive bureaucratic monster trying to make decisions from on top in lieu of profit-seeking entrepreneurs adjusting to new circumstances from the bottom, is striking.

So too with the oft-demonized Wal-Mart. The Wall Street Journal reports (subscription required) that Wal-Mart and Home Depot had batteries, generators and other items that would be of much greater value after a hurricane ready and waiting. Telecommunications companies and utilities made similar preparations. Things, after the immediate disruption was over, worked. Predictions of significant problems in the U.S. agricultural sector, based on the (true) observation that a lot of it moved through the port of New Orleans, the (possible) observation that the port will be at significantly reduced capacity for awhile, and the (unexamined but false) assumption that profit-seeking behavior will not find cost-minimizing alternatives, are not worth worrying about.

New Orleans, in contrast, generated the now-notorious photo of government-owned buses capable of evacuating thousands of people rendered useless by flooding less than two miles from the Superdome. The failures of Katrina were by and large failures of collective decision-making. To say this is not to rule out the possibility that, given the proper incentives, officials can do better. In Cancun, Mexico, where the tourist trade is vital to local standards of living, the government used buses, among other things, to orchestrate the evacuation of tends of thousands of tourists before the arrival of Hurricane Emily in 2004.

But incentives matter, and the incentives operating on politicians are simply different from those operating on public officials. When someone working for Wal-Mart or Verizon fails to investigate (in other words, to collect costly information on) how to deliver the products whose sales pay his salary after an event like this, Wal-Mart and Verizon lose money, and he is fired. When public officials fail to coordinate evacuations and the delivery of aid supplies, they very likely are not. One of the most notable themes in both the remarks of politicians and in media coverage has been whose “fault” the post-Katrina troubles are. Politicians at each level of government are eager to persuade the voters that they should be returned to office, and one way that you do this is to sell a different sort of product, that of blame. From his interview on Meet the Press, here are some of the things said by Mayor Ray Nagin of New Orleans:

MR. RUSSERT: What's the biggest mistake you made?

MAYOR NAGIN: My biggest mistake is having a fundamental assumption that in the state of Louisiana, with an $18 billion budget, in the country of the United States that can move whole fleets of aircraft carriers across the globe in 24 hours, that my fundamental assumption was get as many people to safety as possible, and that the cavalry would be coming within two to three days, and they didn't come.

MR. RUSSERT: Many people point, Mr. Mayor, that on Friday before the hurricane, President Bush declared an impending disaster. And The Houston Chronicle wrote it this way. "[Mayor Nagin's] mandatory evacuation order was issued 20 hours before the storm struck the Louisiana coast, less than half the time researchers determined would be needed to get everyone out. City officials had 550 municipal buses and hundreds of additional school buses at their disposal but made no plans to use them to get people out of New Orleans before the storm, said Chester Wilmot, a civil engineering professor at Louisiana State University and an expert in transportation planning, who helped the city put together its evacuation plan." And we've all see this photograph of these submerged school buses. Why did you not declare, order, a mandatory evacuation on Friday, when the president declared an emergency, and have utilized those buses to get people out?

MAYOR NAGIN: You know, Tim, that's one of the things that will be debated. There has never been a catastrophe in the history of New Orleans like this. There has never been any Category 5 storm of this magnitude that has hit New Orleans directly. We did the things that we thought were best based upon the information that we had. Sure, here was lots of buses out there. But guess what? You can't find drivers that would stay behind with a Category 5 hurricane, you know, pending down on New Orleans. We barely got enough drivers to move people on Sunday, or Saturday and Sunday, to move them to the Superdome. We barely had enough drivers for that. So sure, we had the assets, but the drivers just weren't available.


The Mayor’s biggest mistake, in other words, was in assuming that other people would be up to the task. As for the buses, why were there no drivers? This is precisely the sort of problem that private firms solve all the time, and indeed did solve in the run-up to the hurricane. But the incentive structure of politicians of all parties, local, state and federal, is different. Consumers are buying products whose benefits generally accrue mostly to them, and they have a correspondingly stronger incentive to amass information about those products and the firms selling them. But voters suffer from the problem of rational ignorance. Your chances of influencing the election are so small, and the costs of acquiring more information about all the things the government does are so large, that it seldom pays to be as well-informed about a politician’s behavior as it does about the terms of service for your satellite television. (Not to mention the uninformative quality of campaign advertising, the ease with which politicians can reverse their promises, etc. These tasks are much more difficult when competition occurs directly rather than through the severely attenuated mechanism of elections.)

To continue the analogy, this ultimately is one (but only one) reason why satellite television broadcasts will be up much faster than most government programs in the Katrina-affected area. That the private sector did (to little acclaim) what it was expected to do so effectively while the government failed (to great condemnation) to do what it was expected to do suggests a fundamental misunderstanding both about the value of markets in getting us what we desire and the limits of government in doing the same.

Wednesday, September 07, 2005

A Tale of Two Katrina Cities

To me one of the most personally compelling aspects of the post-Katrina environment has been the huge number of refugees who have ended up in Houston. The Houston Chronicle has estimated that there are 239,000 refugees in Texas altogether, and the largest proportion of them is in Houston.

I grew up in Houston. I have also visited New Orleans many times, and almost took a job there once. I have a fond attachment to both cities, and am struck by how different they are. In many ways New Orleans is the anti-Houston (or vice versa if you prefer), both in stereotype and in the data.

Houston is perhaps the nation’s ultimate free-market city. The lack of zoning laws means that bankrupt restaurants can be converted into anything, and contribute to a startling rate of competitive experimentation and transformation. The downside of this is that people can put of any old thing they want, without concern over the effects on the neighbors. The Economist magazine, in a largely flattering article in 2001, said simply that “Houston is ugly. It was hardly charming to begin with and has pulled down many of its old buildings.” But fundamentally Houston looks like freedom. It looks like people busy going about the very important work of creating value. The self-sorting qualities of the market, whereby art gallery owners like to be situated near other galleries rather than factories, and some homeowners prefer to be in the midst of the big city and others in quiet cul-de-sacs, means that land is still arranged to create the most value. And freedom of commerce promotes somewhat more social harmony, as I argued previously. According to Census data for Houston and New Orleans, Houston is roughly 50% non-"white," and 37.3% of businesses are "minority"-owned. In New Orleans, which is roughly 71% non-"white," only 28.6% of businesses are minority-owned. According to the above Economist piece, an astonishing 88% of Houston residents, the highest of any U.S. city surveyed, agreed in 2001 that “if you work hard in this city, eventually you will succeed.”

But at the same time Houston can never have the soul of the Crescent City. Hardly one of America’s biggest cities, New Orleans is always substantially overrepresented on the list of America’s best restaurants. Its local culture, of which Mardi Gras (the most interesting parts of which have nothing to do with Bourbon Street hedonism) is only the most famous example, has no parallel. While Houston is America stretched to the limit, built on ambition, the freedom to succeed or fail, the constant destruction of the recent past to enable the construction of a new future, and above all the glories of commerce, New Orleans is an outpost of the Old World in the New, devoted to preservation of its ancient ways (it is often said that a family has to be there for 200 years before being accepted as an old-timer) and with the finer things in life. New Orleans, along with Tennessee, invented much of what the world knows as modern American music.

And yet New Orleans is unfortunately increasingly built on the tourist Potemkin village in front masking the poverty-stricken city behind it. In New Orleans the poverty rate is 27.9% (as opposed to 19.2 percent in Houston), 15.3% of industrial employment is in “arts, entertainment, recreation, accommodation and food services,” and 20.4% of residents work for the government. For Houston, these figures are 8.1% and 11.1% respectively. New Orleans, other than the oil industry, prior to Katrina primarily survived as Las Vegas on the bayou and with quirkier culture.

But despite that seemingly limited economic portfolio, the country needs both cities. They are both different parts of what it means to be America. New Orleans will be back, a shrunken but still vital version of its former self, not just because of its unique geographic value but because so many of its people conceive it as vital. To be from New Orleans is to immediately identify yourself to the world as a distinct kind of American, and that sort of invaluable cultural treasure will not go away without a fight. But for those in New Orleans who were stifled by its lack of robust and diverse economic growth, the flip side of America, Houston, beckons.

Tuesday, September 06, 2005

Anarchy is Just A Day Away

The most compelling lesson to learn from the disaster in New Orleans after its rendezvous with Hurricane Katrina is that for years a major American city was one natural disaster away from collapse into barbarism. Think about what has happened. A cruel body blow from Nature kills thousands and destroys a city's technological support system, and in a matter of hours it becomes something out of Joseph Conrad. For all the tourists, the colorful politicians for which Louisana is justly famous, the wonderful food and the eccentric culture, the city was apparently for years a mere 24 hours from utter anarchy. All that time the astonishing fragility of its civilization was hiding in plain sight, requiring only the right impetus to become obvious to everyone.

Let us stipulate that the hurricane was a disaster of unexpected scope. It is almost as if a series of Tunguska meteors had exploded along the length of the Gulf Coast. It is not at all surprising that it might take several days to set up a supply chain to ferry in food, water, and other essentials, and that in the meantime people who stayed would be in dire straits.

Let us also concede that despite being therefore able to stake a claim to some forbearance, no politician in this episode at any level of government has emerged from it drenched in glory. The readiness to blame somebody elsewhere in the federal chain, the quickness with which politicians slipped into the roles anointed for them by our current partisan divides, these things are disappointing. In the end I do not find "Whose fault was it?" to be a very interesting question.

And yet whatever the quality of governance or the magnitude of the disaster, the state of nature did not have to assert itself so quickly. None of those things mandates that civilization's fragile structure must fall apart so matter-of-factly. What has happened is that New Orleans (like, one supposes, most American cities) has a disturbingly large number of people who respond to mass tragedy by beginning wholesale looting within hours, assaulting hospitals and police substations, and shooting at convoys of mercy bringing in relief supplies and rescue boats, forcing them to turn back. These things do not happen in a healthy society no matter what the challenges it faces are. That they could happen in New Orleans, or Detroit, or Los Angeles, when they did not happen, for example, in Kobe after the 1995 earthquake is a lesson we ignore at our peril. It matters not that the ransackers were a minority, that they were vastly outnumbered by those who engaged in heroic measures to save others, and that their victims were mostly those who suffered most from the hurricane. It is still true, and of incredible importance, that they were able to largely take over the city after the waters rushed in, and were able to hold the salvation of civilization at bay for days.

The American conservative is prone to believe that man's nature is unchanging and generally not to be trusted. His mindset does not admit of the possibility of moral progress. To be sure, we are surrounded by spectacular material and scientific progress, but progress in the moral fiber of man is a fantasy. This is perhaps why the odd kinship ties of American conservatism - evangelicals cognizant of original sin and the need for redemption on one hand, economic conservatives fearful of the ultimate predatory nature of Big Government intent on doing good on the other - have held together so well. Both believe ultimately that while man is capable of greatness, he is also capable with only the merest push of utmost savagery. The trick is to construct social institutions to take advantage of his healthy instincts and to restrain his dangerous ones. And those institutions, which we might call our common culture, are in constant need of reinforcement. The failure to do so causes them to break as surely as any levee.

To the left, on the other hand, progress is the natural order of things, and so it is no wonder that as the word "liberal" has fallen into disrepute it has been replaced by "progressive." To the left human history is a tale of continuous moral improvement, led by those who can see the moral future more clearly than the timid conservative who refuses to abandon an unjust status quo because of fear of justice's ultimate reordering of society. It is to the bold progressive then that the task of leading humanity to a better future is given.

But the fruits of progress on display in New Orleans (and in Belfast, too) are disquieting to say the least. The collapse into savagery was simply waiting for some external event to pull the trigger, and any one of sufficient size would have done. For some time several seemingly independent aspects of American cultural capital have been simultaneously decaying. As in much of the rest of the West, the nuclear family - the bedrock of most civilizations for thousands of years - is rapidly falling apart. The effects of that are hard to predict, but if one believes in the implicit wisdom encoded in social tradition, they can't be good. The popular culture, cranked out now by a massively intrusive and influential technology of entertainment, is completing the transformation it has been going through since at least the early twentieth century, with contempt for lives ordinarily lived and even the celebration of antisocial behavior now common. The rise of the suffocating nanny state has promoted the culture of What You Owe Me at the expense of the culture of creation. The coalescence of these trends means that we are essentially eating our cultural seed corn, in the manner of rebellious young dons at Oxford or Cambridge ransacking the wine cellars in a night of drunken orgy.


Is that what brought us to the just-add-water-and-watch-civilization-collapse environment that was apparently lurking just under the surface as Katrina churned into the Gulf? Reasonable people can disagree on that. Perhaps it is the erosion of cultural stores that took centuries to construct, or perhaps it is, as the left would argue, the tendency of the successful in America to want to hermetically seal off the poor so as to forget their inconvenient presence. They can thus build cities where those with means survive and those without are left behind to fend for themselves. But whatever the reason, we had better pay attention to the instant decay of the social fabric in New Orleans, because it is a sign that society's sinews have severely deteriorated. New Orleans just before Katrina was a civilizational house of cards ready to collapse. Any big city, and by extension much of our society, may revert to the Hobbesian jungle at the slightest provocation. The marauders of the Crescent City, however they got that way, are bearers of the message that the ramparts must be shored up while there is still time. If not let no one say that we were not duly warned.