Government serves best by staying out of rebuilding New Orleans

In the U.S., and even in Louisiana to a great extent, there seems to be a great sentiment to allow “democracy” to prevail in governing. Keeping that concept in mind and expanding beyond the parochial thinking and agendas currently articulated will serve the rebuilding efforts of New Orleans well.

As the focus of the aftermath of Hurricane Katrina shifts from cleaning up to recovery, the plans the myriad of commissions (after all, this is Louisiana and where would be without a lot of duplicative, inefficient government) dealing with the idea of how New Orleans will rebuild fall into three major camps. First, there are those that argue for highly-controlled planning by government; second are those that allow for some free-market input (such as the suggestion that anything be allowed to be rebuilt in certain areas for a year or more, see what happens, and then plan accordingly); and third are pure market solutions, letting building and use occur wherever properly zoned.

Strict planning argues that government should prevent private sector building in certain areas of the city, so not only that people stay out of potential harm’s way from future storms, but, with now somewhat of a blank slate, that the city can structure itself geographically and demographically to encourage economic growth. It argues that to let the individual make too many decisions in rebuilding would create alternating islands of activity and blight where the latter kind would prevent the former from prospering and raise the cost of services to government.

But this view ignores the central, salient fact that advocates of government planning never properly grasp, that, just as government cannot tax its way to economic prosperity, neither can it plan its way to the same end. Simply, the aggregate of individuals, separately making decisions, produce superior collective decisions than any group which attempts to do the same (F.A. Hayek’s “catallaxy”). This is because no institution is privileged to all of the information and to the valuations to individuals of the various scenarios involved.

Thus, optimally the pure market solution is the best for New Orleans’ rebuilding. Inevitably, coercive planning will produce suboptimal decisions and the city will not live up to its potential. This does not mean that government’s role must be absolutely minimalist (along the lines of Robert Nozick’s “nightwatchman” state) but rather can offer a few infrastructural incentives to encourage individuals to decide in a certain manner (such as the building of a light rail system in the hopes that development will occur around certain areas). However, this would preclude schemes such as venture capitalist operations funded by tax dollars to attract certain interests (disasters of small kinds presently unfolding in both Shreveport and Bossier City).

Rebuilding New Orleans presents a unique opportunity. The most rapid economic development and most dynamic rebuilding will come not by heavy government involvement in its decision-making, but by precisely the opposite. The new New Orleans could become a showcase for how not to involve government by the creation of a catallactic order. Ironically, a “favorable” confluence of events – widespread destruction of the old order, available federal dollars, desperation for optimal solutions – has put the city and state on the cusp of something truly (and, in some ways sadly given the obvious nature of the solution) revolutionary.

Those involved in this enterprise in government must resist calls for all but the most minimal government participation in land-use choices. If individuals choose in some areas to rebuild and few others do, presently they will see their decisions as sub-optimal and will abandon the area. Local government can hasten that by reminding them of the risk and that, given the area’s sparse population, they should not expect much in the way of services. If worst comes to worst, New Orleans simply could de-annex those areas.

Together, others will decide through the democracy of the marketplace rather than by artificial, less-informed decisions of government, how the reborn New Orleans will look. Government planning will not reconstruct New Orleans well; it just needs to create the conditions by which they can make these choices, then to stay out of the way.