Disaster relief: the private sector can work better

Listen to Congressman Bobby Jindal of Louisiana as he--to borrow a line from our Liberal friends--Speaks Truth to Power:

My office became so frustrated with the bureaucracy that we often turned to private companies. They responded more quickly and flexibly.

After our staff visited communities to assess local needs, Budweiser delivered truckloads of water and ice. Ford provided vehicles for search and rescue. Every company we contacted provided goods and services without compensation.

Related: here's the Washington Post reporting on Wal-Mart's efforts (link courtesy of Ted Frank and Alex Tabarrok):

Cliff Brumfield, executive vice president of the Brookhaven-Lincoln County Chamber of Commerce, said he was impressed with Wal-Mart's preparations.

"They were ready before FEMA was," he said.

And here's Stephen Bainbridge arguing we ought to outsource disasters:

This proposal will shock those who intuitively regard disaster relief as a core government function, but consider how many functions traditionally regarded as public sector responsibilities are already being outsourced to the private sector. Charter schools educate many of our children. Many more of our children are educated in public schools operated by for profit educational management companies. Many prisons are operated by for profit corporations. Even as basic a government function as war making has been partially outsourced, as illustrated by the military's extensive use of private contractors in Iraq and Afghanistan.

If we can outsource war, why not disasters?

Some will have an immediate knee-jerk antagonism to the idea that someone will make money off the suffering of others. We've known the answer to those complaints for centuries, however, thanks to Adam Smith . . . .

Outsourcing works precisely because it takes advantage of Smith's invisible hand.

In the public sector, employee objectives tend to be defined around vague concepts of social welfare maximization that lack determinate metrics. In addition, because government compensation generally does not reward managers whose activities increase asset values or reduce costs, incentives in the public sector tend to be low powered. Civil service and other forms of job tenure make it difficult to discipline government bureaucrats who shirk. Finally, the public sector is subject to capture by rent-seeking interest groups whose private benefits from government regulation often are inconsistent with the public good.

In the private sector, by way of contrast, incentives tend to be much more high powered. The capital, product, and labor markets give corporate managers directors incentives to produce goods and services efficiently. Indeed, these high-powered incentives encourage private firms both to reduce costs and improve quality in a way that the low-powered incentives intrinsic to the public sector simply cannot match.