Step off a ladder twenty feet up, you are going to get hurt. The law of gravity is unforgiving. Just as physical laws can only be ignored at one’s peril, economic laws are equally unforgiving. The most basic economic law is scarcity; that is, there are only limited resources to satisfy humanity’s unlimited wants and needs. There is no free lunch.
The Romans “solved” scarcity through conquest and slavery – they took others’ lunches. We have solved it through free enterprise, liberty, and markets – we make our own lunches and mostly get to keep them. Natural disasters like Hurricane Katrina make the problem of scarcity worse, not just by destroying investments that took decades to build, but by making it more difficult for humans to carry on their daily struggle with scarcity.
The only way to fulfill at least some of our wants and improve our standard of living is to apply human ingenuity and effort. We have to work. Even with automation and computers, we still must produce. The issue is how best to encourage individuals to work. Break out the whips like the Romans? Or encourage private enterprise and reward diligence?
In some ways Hurricane Katrina serves to illustrate how important institutions are in getting the best from human endeavors. Government at all levels seemed initially paralyzed by the disaster. Plans were not carried out. What had been foretold of New Orleans’ fate almost a year earlier in National Geographic was met with stunned inaction by officials charged with anticipating the inevitable. Meanwhile, prior to the hurricane making landfall, Home Depot pulled generators from its stores’ shelves all over the nation and shipped them to stores just beyond the hurricane’s reach.
In the face of scarcity, hard decisions have to be made. Decisions determining our livelihoods. Decisions about how much we work, how hard we work, and whether our work is mostly physical or mental. Some kinds of work can be more valuable than others. Somehow, we have to decide who does what, how it gets done, where, how much, and for whom.
Home Depot did a good job of making these decisions in anticipation of the Katrina disaster. Government did not, even as it spent some $500 million a day.
There are only two ways to organize and coordinate all the work that goes into our ongoing battle with scarcity. We can decide for ourselves, or someone else will decide for us. One way involves free enterprise and businesses big and small. The other requires big government and weighty bureaucracy. One lets individuals control their own destinies. The other leaves important decisions to the privileged few in government.
Even before the first winds blew down Bourbon Street, private organizations were preparing to enter the fray. While competing layers of local, state and federal bureaucracies argued about protocols and command chains, individuals were coordinating relief and rescue efforts.
The marketplace – the exuberant collection of for-profit enterprises, ministries, non-profit agencies and caring individuals – provided rapidly for an efficient distribution of scarce resources where the need was most abundant. Ironically, it was government roadblocks – some literal, some bureaucratic – that slowed the response of private relief agencies. Instead of providing a solution, local, state and federal officials simply stood in the way.
As long as there is scarcity – and there always will be – we will have to work. That work can be harnessed, linked and rewarded through voluntary free enterprise, or it can be harnessed and chained through the force of government. Hurricane Katrina, in its own way, demonstrates the power of liberty over the power of the whip.
Every lunch has a cost, and the marketplace ensures the cost is bearable, even when the labor is one of love born out of tragedy.
Byron Schlomach, Ph.D., is the chief economist for the Texas Public Policy Foundation, an Austin-based, non-profit research institute.