Interview on Wal-Mart and Katrina Research

Last week I was the guest of the Center for Ethics and Entrepreneurship at Rockford College in Illinois where I spoke on my research on Wal-Mart's role in the response to Hurricane Katrina.  As part of my visit, they videotaped a 12 minute interview with me that is now available on their website.

(Yes, I know there's glare off my head :) ).

Comments

[Max]

I have another Wal-Mart example: Second Harvester’s Food Bank of Greater New Orleans and Acadiana (in the Harahan area) was out of commission after the storm. Wal-Mart had built a new super center in Baker (north of Baton Rouge), and the old empty building was across the street. Wal-Mart lent that building to the food bank as a receiving and distribution center for the south Louisiana area. This helped America’s Second Harvest (not a government agency) get much needed food, water and supplies to some of the hardest hit areas after the storm. I spent a week at that store after the storm working the A2H volunteers from all over the country, and it was an incredibly efficient operation for something that was thrown together quickly.

Also, to the food bank’s credit, they called me before the storm to get a data disaster recover in place “just in case.” We were able to get their data infrastructure up and running in that temporary warehouse quickly.

[Tobia Mill]

Since you are at it, you may well share the wisdom with Paul Krugman, who just today wrote:

"And leaving aside the chutzpah of casting the failure of his own party’s governance as proof that government can’t work, does he [Bob Jindal] really think that the response to natural disasters like Katrina is best undertaken by uncoordinated private action? Hey, why bother having an army? Let’s just rely on self-defense by armed citizens. The intellectual incoherence is stunning."

http://krugman.blogs.nytimes.com/2009/02/25/what-should-government-do-a-jindal-meditation/

[Steve Horwitz]

I would but ol' Paul and the NYT has closed comments on that post. I guess he and DeLong are now truly blood brothers in their refusal to allow for dissent (supposedly the highest form of patriotism).

[Chris]

DHL, with its Disaster Response Teams, is another good example. Disaster relief often ends up piled up in the sun at the local airport. So DHL flies in a team to sort out the logistics in the case of natural disasters, especially in the emerging world. It has various teams around the world that can fly out at short notice.

[Craig]

Steve,

Maybe you're tired of beating up on Paul Krugman, but you might want to respond to this:

"And leaving aside the chutzpah of casting the failure of his own party’s governance as proof that government can’t work, does he really think that the response to natural disasters like Katrina is best undertaken by uncoordinated private action?"

http://krugman.blogs.nytimes.com/2009/02/25/what-should-government-do-a-jindal-meditation/

Answer: Yes!

Craig

[Brian Pitt]

Informative interview! Btw, the glare doesn't look bad though.

[Grant]

Dr. Horwitz,

I've read a bit of what you've written about Katrina's disaster relief, but I'm not sure I've ever seen you mention the effects of price gauging laws during disasters. Wouldn't the repeal of these laws incentivize much wider-scale relief on the part of the private sector? To me the whole problem of disaster relief seems like one of markets failing to clear.

[Steve Horwitz]

Great question Grant.

In fact, none of the major big box stores were accused of gouging during Katrina. More interesting, Wal-mart has a corporate policy (pre-dating Katrina) of not raising prices in areas hit by natural disasters. What all of the stores said was that raising their prices in a disaster was the surest way to lose customers, so they all tried not to.

But, you say, doesn't that retard recovery? Not if the firms are big enough. Think like Coase for a second: the normal reasons we think price increases in such situations are good is that they attract in new sources of supply from other firms in the market. But if you're Wal-Mart, you are big enough *by yourself* to move resources from elsewhere in the firm to the affected area without the higher price being the incentive. In Coasean terms, WM is so good at distribution that the transaction costs of bringing their own supplies from elsewhere are much lower than relying on market signals to attract in new suppliers. The can adjust quantities internally without needing price signals.

This also explains why it's almost always small firms who get charged with gouging. It also suggests that large firms will support anti-gouging laws as a rent-seeking device.

[Bob]

If Jindal is "Bevis & Butthead" then Krugman is "Porky Pig" for pushing his "Flat Earth" like Keynesian theories! When you ask him about how Hayek and Mises debunked Keynes' Theory of Employment, Interest and Money he says: "That's All Folks!"