Government vs Private Sector

From Don Boudreaux at Cafe Hayek

By sending this letter to the editor of the New York Times, my friend -- and The Austrian Economists' -- Steve Horwitz shows how a serious economist assesses the politically poisoned "analysis" of a newspaper pundit:

To the Editor:

In his September 1 column (“John, Don’t Go"), Paul Krugman blames the failed response of FEMA during Hurricane Katrina on the Bush Administration’s antipathy to government. To the contrary, FEMA’s failures resulted from two problems endemic to bureaucracies no matter the party in power: a lack of local knowledge and weaker incentives than the private sector to succeed. By contrast, Wal-Mart got supplies and people into the worst-hit areas because its associates and managers had detailed knowledge of their communities and the incentive to help their neighbors that will always be absent in bureaucracies. FEMA’s warehouses of unused resources contrasted with Wal-Mart’s trucks on the move suggest that indeed the failures of Katrina were ones of bureaucratic ignorance, not administration ideology.

Sincerely,
Steven Horwitz

Economists understand that incentives matter; too many pundits think that party matters.