Whimsley

Co-ordination Failures in New Orleans

Just before going to Oslo to collect his Nobel Prize for Economics in December 2005, Thomas Schelling was interviewed by L.A. Times journalist Peter Gosselin about the challenges facing post-Katrina New Orleans. The sheer size of the reconstruction task is daunting, of course, but Schelling talked about something different: the difficulties faced by individual evacuees trying to decide whether or not to move back to the city: “It is essentially a problem of coordinating expectations”, he said. “If we all expect each other to come back, we will. If we don’t, we won’t. But achieving this co-ordination in the circumstances of New Orleans seems impossible.”

Gosselin described the “circumstances of New Orleans” that Schelling was talking about. Washington, he showed, had initially promised large-scale aid, but had then backed off from those commitments, leaving evacuees to make tough decisions on their own. The New Orleans recovery became “a private market affair”. Unfortunately, as Schelling said, the recovery was all about co-ordination, and “There are classes of problems that free markets simply do not deal with well. If ever there was an example, New Orleans is it.”

One of the things about co-ordination problems is that small things can make a big difference. A relatively small kick at the right time can give the process a start and help virtuous cycles to develop. As a result, the right kick can pay benefits out of all proportion to its size. Once the ball is moving in the right direction, people start to move back because others are moving back, and each individual or family that makes the decision makes it easier for still others to move back too.

Without a successful kick start, co-ordination problems are prone to cycles that are vicious rather than virtuous. When uncertainty over the future looms large, many evacuees will not return unless they know that others are moving back too. As Republican representative Richard Baker said “It does no good to stand up just one person or family, because there’s nothing left where they once lived – no schools or grocery stores, doctors or banks, police stations or fire trucks. We’ve got to go into the business of restoring whole communities.”

After Katrina, two things were clear about the kick that New Orleans needed to get resettlement and rebuilding started. First, it had had to come from Washington – the only level of government with the resources to provide it. Second, it had to deal with the core issue of safety. As the New York Times said in an editorial,  “It all boils down to the levee system. People will clear garbage, live in tents, work their fingers to the bone to reclaim homes and lives, but not if they don’t believe they will be protected by more than patches to the same old system that failed during the deadly storm. Homeowners, businesses and insurance companies all need a commitment before they will stake their futures on the city.”

Early on, it looked as if Washington might be prepared to make the kind of commitment that was needed. The tone was set by President Bush in a September 15 (2005) speech in New   Orleans itself: “There is”, he said “no way to imagine America without New Orleans”, and he promised “one of the largest reconstruction efforts the world has ever seen.” “We will do what it takes”, he continued, “we will stay as long as it takes to help citizens rebuild their communities and their lives.”

These are fine words, but they needed to be backed quickly with decisive, large-scale action. And they weren’t. The White House “sat on its pledges all autumn, mumbling homilies about the limits of government.” The Treasury refused to guarantee New Orleans municipal bonds, which had lost all their value, and as a result the mayor was forced “to lay off 3,000 city employees on top of the thousands of education and medial workers already jobless”.

Nine months after the storm, over half of the 500,000 residents of the city of New Orleans have not returned. There is little doubt about the fact of the failure.

* * *

But the story of the reconstruction is not just the story of Washington’s failure to provide tangible commitment. Louisiana in general, and New Orleans in particular, are full of groups with their own agenda. There are some who see the failure of poor people to come back to their homes as a good thing. In New Orleans itself, some of the richer residents wanted to see a different kind of city. In the weeks following the flood Jimmy Reiss, the head of the city's Business Council, talked to Newsweek of “a once in an eon opportunity to change the dynamic” of the city. He has been quoted as saying “Those who want to see this city rebuilt want to see it done in a completely different way: demographically, geographically and politically," [...] "I'm not just speaking for myself here. The way we've been living is not going to happen again, or we're out.” In short, fewer poor people and a smaller, whiter, richer city.

The inability of free markets to help people return gives an opportunity for agendas such as these to be driven forward, all the while asserting that people are making their own choices about their futures. The horns of the return-or-not dilemma are sharper for some than for poor people than for rich people. Those without savings can least afford to make the effort to generate the coordination and investment of effort and resources needed to rebuild their own communities. A recent US Census study showed that the poorer people tended to be driven further away from the city in search of affordable places to live. And the poorer areas of the city are in the more vulnerable areas, where continuing uncertainty over issues such as insurance plagues any attempt at progress.

So it’s not surprising that Joseph Canizaro, another wealthy property developer and prominent Bush supporter said as early as October 2005 “As a practical matter, these poor folks don’t have the resources to go back to our city just like they didn’t have the resources to get out of our city. So we won’t get all those folks back. That’s just a fact.”

And so it has proved. Overall, poor people have returned in fewer numbers than wealthy people. In a city where the lines between rich and poor are often the lines between white and black, those who have returned are more likely to be white and wealthy than those who have not. New Orleans had a black population of 36% before Katrina, now it has a black population of 21%.

Some would argue that Canizaro, in his role as head of the urban planning committee of the Bring New Orleans Back commission, helped to turn his blunt “that’s just a fact” observation into a reality. He lobbied for a building moratorium in the hardest hit neighbourhoods while they proved their viability: funds would go only to those neighbourhoods where at least half of the residents had made a commitment to return. Such a moratorium just compounds the Catch 22. Now no building can happen unless there are people willing to buy or rent it. And no one will return to buy or rent unless they know there will be a building for them. And we know who is affected most by such a criterion: it’s the poor people again.

There was a bigger agenda behind the suggestion. Once these areas had predictably failed to “prove their viability” the BNOB commission proposed a new public agency that would have been “empowered to seize land in areas that failed the challenge” (NYT). That is, homeowners who did not have the resources to return would be doubly punished by having their land seized. A visiting developer told the BNOB commission “Your housing is now a public resource. You can’t think of it as private property any more." The Urban Land Institute, a property developers’ organization, argued that the mayor let the market reshape New Orleans, and turn areas where redevelopment fails into parkland.

* * *

Washington’s failure of commitment, the predictable failure of market mechanisms to help people return to New Orleans, and the exploitation of that failure to remake New Orleans in a different manner, is not a cheery story. There are, however, a few bright lights in the picture.

The developer-led agenda for a smaller, richer, and whiter city is meeting with some resistance. The BNOB plan was greeted by a public outcry. Mayor Nagin, whose position is difficult to read and who is often happy to go along with the inevitable co-ordination failure in the absence of real commitment — he has said that anyone who really wants to will "figure out a way to come back." —rejected the plan, and according to the NYT the BNOB has hardly been heard of since. But many of those who proposed it continue to be in influential positions, and continue to have ways to meet their goals.

The main source of hope is strong community organizations. In his LA Times article, Peter Gosselin wrote about Greek Orthodox community and the way in which its church helped its members to co-ordinate their escape from Katrina and their return afterwards. “By acting in concert, members of the Greek community have in effect provided each other with an immense self-insurance policy, guaranteeing that if one family rebuilds, others will.” Community activist groups such as the ACORN Katrina Survivors Association have helped to give people the means to co-ordinate their own return and a voice to influence the way that New Orleans is being rebuilt, campaigning for a right to return.

The future still looks grim for the survivors of Hurricane Katrina. But if the residents of New Orleans are to be a part of the rebuilt city, and if Washington is unwilling to help, then it is groups such as these that hold the key to success.

On Their Own in Battered New Orleans - Los Angeles Times

Via Brad DeLong, an essay in the Los Angeles Times about the difficulties of reconstruction in New Orleans: On Their Own in Battered New Orleans - Los Angeles Times.

The article picks up on two ways in which sensible individual choices may lead to very different outcomes.

What seems to have happened is that the US government has decided that the free market will take care of rebuilding New Orleans, as "the agencies that were stepping up to help guide the city's comeback have stepped back down again" and "[t]o an extent almost inconceivable a few months ago, the only real actors in the rebuilding drama at the moment are the city's homeowners and business owners."

Reconstruction of a city is different from buying cauliflower though, and the article quotes Thomas Schelling as saying "There is no market solution to New Orleans... It essentially is a problem of coordinating expectations. If we all expect each other to come back, we will. If we don't, we won't. But achieving this coordination in the circumstances of New Orleans seems impossible."

The LA Times interviews one woman who is trying to decide whether to return and rebuild or to just move out. She would like to rebuild, but only if she would be surrounded by a neighbourhood. There is no sense rebuilding in a wasteland:

As a work crew gutted 1249 Granada Drive on Monday, heaping appliances, sofas and sheetrock in a 6-foot pile on the curb, Laurie Vignaud suddenly realized her only evidence that any of her neighbors had returned since Katrina was similar heaps outside their houses.

But do those piles mean that Granada Drive residents are ready to rebuild, or simply are picking through the wreckage and trying to buy time by stopping the mold's spread?

"I keep looking at all this stuff and wondering whether they're coming back or not," said Vignaud. "It's crazy, like a riddle I can't solve."

What is needed here is co-ordinated, collective action rather than individual, market-like behaviour. And those communities that have ways of co-ordinating such activity are the ones who are returning:

In fact, a few neighborhoods appear to have solved the riddle, or at least to have taken a good run at it. But the ways in which they have says much about the daunting dimensions of the problem facing the rest of the city.

On the northern edge of the city is New Orleans' Greek Orthodox community and its church, Holy Trinity Cathedral. As warnings about Katrina grew darker in the days before the storm, community leaders matched up families to whisk the elderly and infirm out of danger. In the days immediately after, they mobilized to come back again.

"We ran it like a business," said John D. Georges, the parish council president and chief executive of Imperial Trading Co., a regional supplier of convenience stores.

Father Anthony Stratis worked the phones and sent out e-mails to find parishioners. Parish council member Dr. Nick Moustoukas followed up by wiring money to the neediest. Ten days after the storm, Georges and council member Christ Kanellakis helicoptered in to rescue the church's chalice and tabernacle.

By acting in concert, members of the Greek community have in effect provided each other with an immense self-insurance policy, guaranteeing that if one family rebuilds, others will. And, should more enticement be needed, the church, according to Georges, Moustoukas and others, is providing returning families with thousands of dollars of cash aid, has organized bulk purchases of new appliances and has arranged for crews that repaired the cathedral to be introduced to people whose houses are in need of work.

By the time the cathedral reopens for its first full service in two weeks, its marble interior walls will have been repaired, its lawn will have been resodded and Holy Trinity will be back in business.

The second way in which individual choice may go wrong in New Orleans is not so much about the relationship among the citizens of the city, it is more about the relationship between citizens and government. If citizens are to return, they need a commitment from the government that the city will be made safe. Meanwhile. the government is backing off:

"If they put back good levees to the [Category 3] level authorized before Katrina and we can get a commitment to build them slowly up to Category 5, people will come back," said Walter Isaacson, a News Orleans native, former editor of Time magazine, former chairman of CNN and co-chairman of the Louisiana Recovery Authority, a new state board appointed by Gov. Kathleen Babineaux Blanco to oversee reconstruction. "It won't be a purely rational decision, but they'll come."

But the corps has made it clear that it has no intention of making any such grand commitment soon.

In part, the problem is cost; estimates of what it would cost to bring the city's levees up to Category 5 range from $4 billion to more than $30 billion. In addition, the corps' budget is perhaps the most closely controlled of any in the federal government, with Congress ear-marking almost every dollar to particular projects, leaving the corps little maneuvering room.

But there also appears to be a sense among senior corps officials that local demands for greater protection, if indulged, would be unceasing.

"It's of interest to me," New Orleans district commander Col. Richard P. Wagenaar told the Los Angeles Times several weeks ago, "that all the political leaders, all the business leaders and all the homeowners were all perfectly comfortable with the system on Aug. 28," the day before Katrina made landfall. "They knew full well it was being built to Category 3, and everybody was fine with that," he said.

But when a storm of greater strength struck and overwhelmed the levees, Wagenaar said, people "suddenly wanted to look back and say, 'Hey, what happened?' " The implication: When would calls for still more ever end?

The concern is apparently one of moral hazard, that by investing in New Orleans the agencies will simply encourage demands for more. I have no way of knowing if there is any basis whatsoever to the concerns (although in other circumstances, such as health care, the concern is overrated as Malcolm Gladwell recently explained). But it is clear that without a real commitment from the government, New Orleans won't rebuild quickly.

This is what happens when you have a government who doesn't believe that governments can be useful. It is too bad.