Homeland Security Watch

News and analysis of critical issues in homeland security

March 30, 2011

Recovery: Selfless Acts of Economy

Filed under: Futures,Strategy — by Mark Chubb on March 30, 2011

When I posted Ruthless Resilience two weeks ago, I had suspected (or maybe hoped) some of you would take issue with my thesis that markets take care of themselves and in doing so exhibit more resilience than almost any other human system. Of course, my thesis relied upon the assumption that the economy, like the planet, will survive the calamities confronting us in some form even if it is not one we find particularly satisfactory.

That this can be said of the macroeconomy also says an awful lot about the sorts of microeconomic choices that confront market participants after disaster strikes. Economies rise and fall on their ability to help us meet our wants and needs. In fact, it is the difficulty the market has with making a distinction between the two (our wants and our needs), or perhaps more accurately the ease with which it utterly ignores the very existence of any meaningful distinction between the two conditions that causes much of the concern about the economic effects of disasters.

As New Zealand and Japan face the daunting tasks of reconstructing their communities, the economic effects of their respective disasters has received considerable attention. But that attention has shed very little light on the values informing market participants’ decisions about their present situations.

Economists like to assume that rational people act in their own self-interest. As such, they would have us believe that people left to their own and confronted with competing choices, will choose the option that yields the most utility. In this sense, utility is best understood as the ability of the chosen option to satisfy one’s notion of his or her interests or expectations. Although these considerations leave plenty of room for people to choose things that make them feel good by appealing to altruism or compassion rather than one’s own temporal concerns with safety and security,  such choices afford them little immediate advantage and almost always leave economists puzzled.

We have many examples of economic transactions in which people behave in ways that leave them less well off and others better off without any tangible evidence that those giving receive anything in return but the warm feeling of having done something nice for someone else. Perhaps the most common and tangible example is the tendency to tip service workers even when we have no reasonable expectation of ever seeing or interacting with them again. We have already benefited from their services and have nothing to more to gain by being generous rather than stingy. But we still choose to follow conventions that reward those who serve us knowing that it is the right or just thing to do.

Maybe this sentiment helps explain why the leading suggestions for how to rebuild Christchurch’s shattered central city precincts emphasize principles of sustainable design. The leading citizen-submitted suggestions for the future of Christchurch rated by visitors to the Re-imagine Christchurch website recommend steps to make the resurrected city the best example of sustainable urban design on the planet.

Such sentiments are not without precedent. After the devastating 1931 Hawke’s Bay Earthquake, the residents of Napier rebuilt that city in a way that has made it one of the best examples of Art Deco design in the world.

Christchurch’s residents seem inclined to leverage the city’s pre-quake identity as the Garden City to green their community even further. Some even seem willing to relegate cars to the dust-bin of history and rebuild in ways that make the relatively flat cityscape even easier to transit by walking, biking or riding buses, trains or other modes of mass transit than it already is.

This would be interesting enough even if it were not accompanied by some suggestions that emphasize efforts to retain some slightly quirky urban design characteristics, like those one contributor refers to as “secret spaces.”

Economists might have us believe that such suggestions reflect the interests of Christchurch’s residents in encouraging tourism, which does constitute a significant portion of the local export economy. But I would like to believe that the aspirations reflected in these suggestions indicate a higher sense of value and a commitment to future generations’ enjoyment of a place that has inspired and sustained many generations already.

In the end, those making the decisions about how to rebuild may neither have much to gain from these choices nor much more to lose than that which has already been sacrificed. If economists’ efforts to work out the puzzling ways in which our values influence our decisions are right in assuming that we value present losses more highly than future gains, then there has never been a better to time act selflessly than right now.

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7 Comments »

Comment by Claire B. Rubin

March 30, 2011 @ 3:21 am

Regarding recovery in NZ and also Japan, I think that too much attention is being given to financial and economic aspects of recovery and not enough to other dimensions of rebuilding structures and relocating people. The media favors coverage by pundits and reporters who focus on finance and economics.

Since all too few people are experts in long-term recovery, for large cities and for nations, we are not getting the full picture, in my view. Recovery from disaster is a long, messy, and difficult process.

In the U.S. we lack a knowledge base of recovery experience, so there is no objective basis for discussing the duration of the recovery process or other dimensions of complex disaster events.

Comment by William R. Cumming

March 30, 2011 @ 3:38 am

Great post and comment!

So let’s see not much technical expertise in recovery and now I count about 25 nation-states facing various recovery problems one way or another. Did not a recent analyst publish a book concerning disaster as creating economic opportunity but only for those with assets to exploit the opportunity to have the recovery conform to what they wanted to make a profit not what was needed?

So here is my suggestion–eminent domain and seizure of damaged structures and property post disaster with public participation in how rebuilding occurs. The free market was ended in reality by MOTHER NATURE not some regulator and just needs to be recognized. Hey and just compensation should reflect post-disaster not pre-disaster values. Makes mitigation much more cost effective.

Comment by Mark Chubb

March 30, 2011 @ 4:23 am

Thanks for the comments, Claire and Bill!

I agree that the pundits have helped distort perceptions of these disasters and the subsequent recovery dilemma each country now confronts. So much so in fact that I hear a voice screaming inside my head each time I one of them appears that says: “Markets take care of markets. People take care of themselves and one another.”

Of course, people participate in markets while looking after their needs and those of others. But markets do as much or more to mask the true motivations behind these decisions as they do to reveal their true meanings.

New Zealand and Japan, like many other western democracies, our own included, have tended to drink the Kool-Aid of neo-liberal economic thought that relies on the rational actor model to inform policy interventions. As such, their leaders tend to conflate their thinking about the relationships between people and markets.

If economic conservatism has any merit in making decisions about recovery, it would do well to recognize a lot of good can be accomplished by promoting idealistic as well as practical solutions to the dilemmas confronting post-disaster communities. Helping these communities realize their aspirations by investing in solutions that favor long-term welfare may not make anybody rich quickly, but they certainly make a community and society richer in the long run, which is what economic conservatives would like us to believe is the real purpose behind relying on markets not men.

At the risk of relying too heavily on stereotypes, I myself, would prefer to rely not on men and markets, but also on women and welfare when it comes to recovery. The masculine tendency to prefer reason and action over compassion and core values leads to short-term thinking that pits interests against one another just when the community most needs to come together.

We can already see this happening in both Japan and New Zealand. Those with resources and those with big ideas are duking it out at the moment, leaving the little guys to fend for themselves. As they do so, their actions show the power of both forces at work: economy and empathy.

Maybe Bill has it right. Facilitating the market by wiping the slate clean would be the best plan. But only if we put democratic principles to work for a good greater than the economic interests of those who can afford to participate in the marketplace of ideas about the future we all share.

Comment by Claire B. Rubin

March 30, 2011 @ 6:35 am

I think Bill is referring to Naomi Klein’s book called Disaster Capitalism — a fascinating read for those interested.

Interesting suggestion re men and materials and women and welfare. I guess it is a variation on hard and soft sciences being applied. Although economics is a social science, I think we need to spend more time considering human needs and human behavior for the recovery period.

Comment by William R. Cumming

March 30, 2011 @ 9:24 am

Thanks Claire! Yes that is the author and the book. I often get my Naomi’s mixed up!

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