Saturday, March 21, 2009

It's all about incentives

The idea of "market failures" to be corrected by wise and selfless politicians and bureaucrats is standard fare in economics textbooks and courses and standard discourse among deep thinkers (thanks, again, Tom Sowell). One would think that the insights of public choice economics had demolished this fairy tale, but it is too good a chestnut to ever let go.

In the Spring 2009 Independent Review, Steven Horowitz writes about "Wal-Mart to the Rescue: Private Enterprise's Response to Hurricane Katrina." The public sector failed miserably, but alert private action was available to alleviate some of the suffering. Horwitz documents the case and also explains how and why it all occurred.