Shouldn’t the fact that WalMart finds it more efficient to be a bureaucracy of 1.5 million people–rather than to split itself up into 15,000 companies of a hundred employees each–make Arnold Kling a little hesitant in his declarations that FEMA was bound to foul up this badly no matter what?
FEMA is one agency, with no competition, that never was very effective at its old mission (which seems to have been providing assistance to disaster victims weeks or months after disaster), trying to transition to a new mission (doing something about disasters in real time) in the midst of what is probably a demoralizing re-organization (being buried in DHS).
Wal-Mart is the (temporary) winner of a decades-long, ruthless, competitive process in national retailing. My understanding is that they won through superior logistics management–getting the right stuff from the right suppliers to the right stores at the right time.
The fact that Wal-Mart is not highly decentralized reflects the importance of economies of scale in its logistics capability. It says nothing about the likelihood that centralized government programs will work as intended.
I am not sure that there are economies of scale in FEMA’s situation. In fact, local knowledge and improvisation are probably pretty important in handling disaster situations. So, the short answer to Brad’s arguments is this:
1) The economies of scale that are evident in Wal-Mart’s business may not figure so prominently in FEMA’s organizational challenge.
2) Just because a company that has emerged from decades of competition is regarded as efficient is no reason to expect a government agency to show comparable efficiency.
READER COMMENTS
Brad Hutchings
Sep 15 2005 at 4:11pm
According to an interview with former FEMA director Michael “Brownie” Brown in the NYT today, FEMA has about 2600 employees scattered throughout the country and their job is to coordinate disaster relief among state and federal resources, obviously (through their lack of numbers) not to provide the footsoldiers. FEMA’s response to Katrina in Alabama and Mississippi was excellent. But when confronted with a state that is both basically French and totally corrupt, the going was a little more difficult. Brownie also said that when Honoré marched into town, things started going well.
mcwop
Sep 15 2005 at 4:33pm
Size does not matter. After all, Wal-Mart had trucks of goods in the Katrina zone before the government did. The matter at hand is that the government sucks at providing many crucial services.
Some backup
Let’s remember this the next time the government tells Wal-Mart how it should do things.
Patrick R. Sullivan
Sep 15 2005 at 5:36pm
I wonder if J. Bradford knows what’s become of the Wal-Mart of the 70s, WT Grant?
But, ultimately, it’s the incentives they face, not how large the organization is.
Matt McIntosh
Sep 15 2005 at 7:53pm
Good lawd, an economics PhD that doesn’t understand the different incentives faced by Wal-Mart and FEMA? I’m almost embarrassed for him.
Impeach Brad DeLong. Impeach him now.
David Thomson
Sep 16 2005 at 6:52am
I am flabbergasted by the naiveté of Brad DeLong’s remarks. Wal-mart is forced to compete for business. Governmental agencies have a monopoly—and can often coerce a citizen to do their bidding. They are inclined to get fat and lazy. Wal-Mart can never afford to be so nonchalant. Why am I forced to say something so obvious? Oh gosh, will I now also have to point out that the sun rises in the morning or 2+2=4?
Who would DeLong say something so patently ridiculous? Is it perhaps due to the fact that he attended Harvard University where the adulation of big government is almost a required dogma of belief? Yes, I think that might have something to do with it.
Timothy
Sep 16 2005 at 9:23am
Well, DeLong has said in the past that he’s sympathetic to Marxism so I’m not exactly surprised by his postion on this.
Patrick R. Sullivan
Sep 16 2005 at 9:50am
It was bad enough he said it once, but he repeated his blunder again in response to a commenter:
And got undressed by another:
Tony
Sep 16 2005 at 11:27am
Ummm.. you’re article said that the government was doing horrible because it’s large and centralized. He pointed out that many free-enterprise organizations choose to remain large and centralized.
So of course you ignore this and yell “Walmart faces competition!”, which wasn’t your original point. And the people get to jump in accusing him of being a horrible demagogue and not deserving his PhD.
Jim Glass
Sep 16 2005 at 11:50am
Well…
“Of the 19 leading textbooks … only 2 references are made to entrepreneur, only 5 to institutions, only 8 to property rights, and not a single reference to economic freedom, invention, or tacit knowledge. It is quite obvious that economists have eradicated entrepreneurship and institutions from core Ph.D. training….” Econjournalwatch [pdf]
And now I read Dierdre McCloskey on how econ departments are eliminating economic history from the curriculum too.
So is it surprising that so many economists don’t know so many basics of economics? Like the importance of little things like “competition”?
Or that they are unable to compute even a high-school level example of opportunity cost…?
… while no doubt being able to use calculus to compute an nth derivative.
So if one of them wants to be an Intelligent Designer social engineer, following in the footsteps of so many who have failed at that before — *and* to get indignantly self-righteous about it — as long as things like the systemic effects of competition aren’t considered, and the warning lessons of history aren’t either, what’s to stop him?
Tom Myers
Sep 16 2005 at 12:18pm
I’m wondering if either Arnold Kling or Brad Delong realize that WalMart is being sued, in part, for being too heavily decentralized? (The class action argument also claims that it’s centralized, and of course it’s both.) I’ve put some thoughts on this at
On Being the Right Size for Disaster-Handling. I don’t have an answer, just more questions and (links to) a little data.
Jon
Sep 16 2005 at 12:35pm
Arnold seems to have this fatalistic assumption that anything the government does is bound to fail. Brad’s only point was that Bush’s appointments were so lousy, even bureuacratic interia could not protect FEMA from the damage.
Arnold — do you expect every city to maintain adequate search and rescue for such a large scale disaster? Unless you do, a well run federal agency is the only game in town.
Adam
Sep 16 2005 at 3:53pm
Why is it ridiculous to expect a city and state to be able to maintain adequate search and rescue for large scale disastors?
Chris Bolts
Sep 16 2005 at 4:14pm
I don’t think Arnold is arguing that everything that government does results in failure, but that since the government faces no need to innovate or it can never develop the efficiencies that businesses are forced to do through competition (as he states in his 2nd point).
There is no physical way that a city can keep up to date on search and rescue operations in times of disaster, but if you reside in an area that receives the second highest number of hurricane hits, you’d think it would be high on that city’s priority list to think of ways to guard against it, especially if that city is below sea level AND is surrounded by bodies of water to the west, east, and south.
Victor
Sep 17 2005 at 12:29pm
Geez. How many ways can someone be wrong? There’s the hindsight bias (how did he know that Wal-Mart’s bureaucracy would prove the correct model as opposed to K-Mart or Walgreens or JCPenny or Sears). There’s the fact that Wal-Mart is forced to be responsive to a singular goal: profits. To the extent that they diverge from this goal, opportunities arise from competition to drive them out of the market. (i.e., how many people here think that Wal-Mart would sent their employees to sexual harrassment training the day after a huge corporate disaster, rather than responding in full force?).
Government bureaucracies are responsible to the administration, but overall failure carries with it few personal or government consequences. When was the last time institutional failure led a reduction in the size of the institution or a reduction in tax collections? People don’t willingly buy services from the gov’t; they pay for them at gunpoint. The only way we can punish an inefficient gov’t is by changing our political leaders every couple of years, and even their impact is only tangential. If Wal-Mart’s bureaucracy reaches would fail to a similar degree, all we would have to do is cease to shop there.
Truly amazing. I agree with Jim Glass: economists are losing sight of the forest.
Jon
Sep 17 2005 at 1:24pm
Some of the things said here are pretty amazing:
Huh? Just after a high government official was forced to resign? and “Ukrainian President Viktor Yushchenko fired his seven-month-old government”
There are plenty of government programs or institutions that get cut when they are deemed failures or not worthwhile. Maybe not many recently under Bush.
Also
.
Did you hear of something called the Manhattan project? NIH? Who put up all of those satellites that track the hurricanes?
Chris Bolts
Sep 19 2005 at 2:52pm
[quote]Did you hear of something called the Manhattan project? NIH? Who put up all of those satellites that track the hurricanes?[/quote]
All of the research that led to the innovations you mentioned was done in the private sector, but whether we would have nuclear power, advanced health technologies, or the ability to track hurricanes via satellites due to government is entirely debatable. Of course, I don’t have as much knowledge on either project so I’ll leave that up to the experts.
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