July, 2009

Private Solutions to Public Disasters

Self-Reliance and Social Resilience
  • Peter J. Boettke

    Director, F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics
  • Daniel J. Smith

Key materials
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Profit-seeking entrepreneurs are vital to any recovery process.  Entrepreneurs must be able to unrestrictedly allocate land and labor resources to their most urgent employments, as expressed by customers through prices. Any interference with the structure of prices distorts the signals that entrepreneurs receive, misdirecting or hampering their efforts.  Misallocation of resources can literally be a matter of life and death in the immediate aftermath of a natural disaster or war.  Price ceilings dampen the ability of profits to induce increased supply of needed goods and services, and distort the ability of prices to signal consumers to ration and economize scarce resources.  Poor policy unnecessarily blocks and inhibits the labor and capital adjustments necessary for a complete and timely recovery by distorting entrepreneurial calculation and preventing entrepreneurs from allocating resources to their most productive uses.  

Despite having their plans frustrated through the regulations and uncertainty created by government action, humankind has still demonstrated a remarkable resilience following a natural or manmade disaster.  We argue that this is due to the civilizing and coordinating roles played by civil society.  For-profit companies, charities and churches play a vital role in the recovery process.  These organizations have proven to be the first, and most well equipped responders to disasters, jump starting the recovery process.