The Use of Knowledge in Natural Disaster Relief Management
Originally published in The Independent Review
In this paper, Professors Russell Sobel and Peter Leeson analyze information asymmetries that appear in top-down efforts at alleviating the effects of natural disasters.
Natural-disaster relief management succeeds or fails on the basis of the managers’ ability to gather, evaluate, and act on decentralized, informal knowledge of logistics, local needs, and changing circumstances. The case of the Hurricane Katrina relief effort suggests that commercial and non-profit networks are inherently better suited for grappling with the “knowledge problem” than are central government bureaucracies such as the Federal Emergency Management Agency.
To successfully coordinate natural disaster relief, society must solve Hayek's "knowledge problem" at three critical information nodes: (1) identification of disaster; (2) determination of what relief is needed and who needs which relief resources; and (3) evaluation of on-going relief efforts. This paper investigates the comparative ability of government and the private sector to do this. The authors find that government is inherently incapable of generating the information needed to solve the knowledge problem at any of these nodes. In contrast, the private sector is capable of solving the knowledge problem at each information node. The results of the analysis suggest that disaster relief reforms which leave government as the primary manager of natural disasters are bound to fail. Correcting government's information failure in the context of disaster relief requires eliminating its root cause: government itself.
View the article at the Independent Review.
Citation: Sobel, Russell and Peter T. Leeson. "The Use of Knowledge in Natural Disaster Relief Management." Independent Review 11, no. 4 (2007): 519-532.