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The Cultural and Political Economy of Recovery. Social learning in a post-disaster environment

Hurricane Katrina has the special distinction of both having caused stupendous physical, social and financial damage and of having initially had one of the most incompetent natural disaster responses in US history. Importantly, unlike the recent BP oil spill, the general expectation was that Uncle Sam should shoulder the burden of the response. This makes The Cultural and Political Economy of Recovery by an advocate of the Austrian economic tradition (epitomized by the work of Mises and Hayek) particularly significant: obviously big government will not be claimed to be the main answer in the Katrina case and yet, empirically speaking, any reader will hope to be dissuaded of this in a way that disentangles extreme government incompetence in this case from the theoretically possible response that a competent government might have provided. In short, Emily Chamlee-Wright has taken on the case to provide an alternative to big government in disaster relief but has both an empirical and a theoretical task to complete.

Neoclassical economics is often caricatured as involving the conceit that the market can solve all problems through its focus on efficiency, but its macro-economics branch has always been based on the notion that what the market cannot resolve due to knowledge imperfections or its preoccupation with efficiency, e.g. issues of inequality, can and should be addressed by government policies. Given imperfect knowledge, the Austrian school puts its confidence in the human capacity to discover what is needed despite imperfect market information, yet, due to an abiding distrust in government’s economic role, it has little faith in the government providing adequate compensations for market deficiencies. Instead, the Austrian approach suggests empirical research into non-priced phenomena helps all economic actors find their voice.

In the Austrian perspective, markets have the virtue of providing signals that convey information from a broader set of individuals than those in any network, but such price information is itself insufficient for rational decision-making and must be combined with an analysis of social capital (often glossed as knowledge and norms related to non-priced phenomena) before it is possible to understand local decisions. The “extended order” includes both priced and non-priced phenomena, and rational behavior involves evaluation of both. Market prices convey information and, though they are imperfect in the real world, i.e. do not coincide with their theoretical Pareto-optimum levels, prices are seen as ideally emerging from a deliberate process of discovery and action by economic agents rather than governments. They can be viewed as signals that convey information about classic producer supply and consumer demand or as signals that also reflect advertising influence or the less biased influence of education along with various constraints derived from wealth distribution and market power. Chamlee-Wright’s implementation, cultural economics, views social capital in a fairly anthropological sense, as both networks and knowledge as well as cultural schemas (conscious and unconscious) comprising models and norms that structure perception (107).

This fascinating book has three parts: (1) theoretical frame and methodology (two chapters), (2) deploying socially embedded resources in a post-disaster context (four chapters), and (3) political economy and social learning in non-priced environments (three chapters). The second and third sections are based on a mixture of surveys and in-depth interviews that amply support the general claims that the recovery effort was severely flawed and that much of it hampered the emergence of self-ordering social capital that could have hastened recovery.

In the interest of brevity, I will focus on Chamlee-Wright’s key conclusions and most interesting insights. Throughout, the book provides abundant illustration of the importance of evaluating social capital within civil society and of the felicity of the Austrian idea of studying the “extended order” rather than just the market. The defining conclusion of the book, in reference to the Katrina disaster response, might be said to be the following:

Given that in general public policy is not designed to tap the potential of civil society, but instead often unintentionally undermines it, this expansion of government’s presence is likely to inhibit bottom-up efforts (176).

Chamlee-Wright’s rich theoretical and empirical analysis of the aftermath of Katrina in New Orleans makes a strong case for such conclusions but with the Austrians’ fear of the “fell hand of government,” just as with Adam Smith’s famously helpful “hidden hand” of the market, the assumptions and qualifications (in each the famous “often” seems critical) are as important as the conclusions. Chamlee-Wright’s claim is that the re-forming of local community associations/ networks around key nodes provides the greatest incentive for refugees to return and rebuild. Meanwhile, the greater the imposition of government authority (e.g. permitting rules and, more generally, bureaucracy aimed at alleviating future government blame through studies and the imposition of standards and delays), the greater the failure of rebuilding efforts.

This empirical finding fits so nicely with the theoretical presuppositions of Austrian economics that any reader will wonder if the facts have been chosen to fit the theory. City planning is, after all, an art that rarely helps to be rushed even if the result is damage to social capital. No doubt the damage could have been radically reduced with less incompetent leadership, yet the general theoretical implications are less clear. I am not persuaded either way, but a single case in which government incompetence was so extraordinary cannot really be thought to confirm the more general hypothesis that disaster recovery should put most of its emphasis on quickly facilitating the local rebuilding of social capital and rely as little as possible on direct government intervention—however appealing the idea is to many social scientists. At its best, this conclusion seems to imply that as social capital of a particularly valued kind characterized New Orleans, any discouragement that delays its reconstruction will fundamentally change the city’s post-disaster character for the worse. Those who have visited Bourbon Street recently will know that it is a travesty of its pre-disaster self, and no doubt this is true of many other areas as well but it is unclear how short-term this is and, even though a short-term analysis is important, in a decade our evaluation may be different.

One of the best, of many excellent, chapters in the book is the seventh, “The deleterious effects of signal noise in post-disaster recovery.” This chapter is replete with examples of bureaucratic delays (a signal itself to the citizens to delay any decision), mixed signals, strong signals that only government authorities can take any decisions, inevitable price distortions, and a plethora of non-signals by those who used to inhabit neighborhoods. These are attributed to the widespread geographic location of refugees and the outright prevention of key neighborhood nodes from returning—thus preventing or delaying signals that would encourage people to return. This and the passage of time, which forced decisions on families, meant that signals in the priced and non-priced areas presented as confused a picture as it is possible to imagine and were anything but conducive to the rebuilding of New Orleans. With confused signals in non-priced areas, the social learning essential to rebuilding New Orleans was seriously hampered. It would be difficult not to lay the blame for this on one or more levels of government bureaucracy.

The neoclassical and the Austrian approach to economic analysis are not the only options. My own preferred economic theory is the almost Heraclitan view of Nell (1998). Nell suggests that the primary role of the market is to stimulate competition and thereby promote transformational growth (as opposed to conveying the socially optimal or even approximately optimal value of things). In this view, government, society and the market (as largely shaped by corporate behavior) interact to produce emergent and transformed economic systems (yesterday’s or tomorrow’s capitalism is not today’s). Policy instruments and emergent systems complement each other. Social knowledge can then be conceived broadly as including knowledge of structural inequality, policy effects on prices (e.g. mortgages, securities, financial sector pay packages, etc.) and historical trends (e.g. in the GINI coefficient). This knowledge can reverberate on government policy, influence even corporate economic agents, shape the actions of local associations creating social capital, and guide the goals of philanthropic organizations.

The main flaw in a traditional market-focused analysis (Austrian or neoclassical), that weights the choices of the rich more heavily than those of the poor and exhibits a tendency to imagine prices are givens, or worse optimal, can obviously be addressed in many ways. The Austrian approach seems felicitous, imaginative and constructive in its direction of equal attention toward civil society, but its aversion to government action (the inverse of the neoclassical macro-economic valuation of it) seems to bring with it a similar blindspot about corporate-government misbehavior. Even as government incompetence is much in evidence, the role of corporate greed (e.g. Haliburton) in seeking government contracts to clean up the Katrina disaster and corporate failure to hire locals is not mentioned. Corporate rent seeking is readily accommodated within the Austrian perspective. While there is only one set of signals to go on in a given case, there are usually many sources of signal distortion, and in corporate America some of that distortion can be laid at the door of corporations—including those who now do so much to help elect politicians who will do their bidding. At no point does Chamlee-Wright raise the issue of corporate influence on government activity or explicitly recognize the American reality that corporations write much of the “regulation” on the Hill.


Thomas K. Park received a Masters in Economics and a Ph.D. in Anthropology and History from the University of Wisconsin-Madison (1983) and teaches in the School of Anthropology at the University of Arizona. His environmental and urban research has been funded by NSF. A current project is an historical study of credit in the Fertile Crescent and the Mediterranean.



Nell, Edward. 1998.  The General Theory of Transformational Growth. Keynes After Sraffa. Cambridge: Cambridge University Press.

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