Think about public policy concerning disaster relief — the typical argument is that government intervention is necessary to supply affected people with food, clothing, shelter, and construction resources. One theoretical foundation of this argument is the standard public good model, which shows that profit maximizing/utility maximizing individuals will not supply the optimal amount of a valuable good because of the inability to exclude consumption by those who don’t pay. The result is free riding of non-payers on payers, which in the limit falls apart because no rational agent would pay for the good if presented with the option of consuming the good without paying for it. Therefore, government provision is required to mitigate the free rider problem.
This public good/free riding model has several flaws that make the model incapable of explaining real-world private action and voluntary association that happens in the wake of a natural disaster. The first and most glaring flaw in the model is the rationality assumption embedded in it, which assumes that a profit-maximizing firm or a utility-maximizing individual will not contribute if presented with the possibility of having disaster relief exist without having to contribute. To paraphrase Deirdre McCloskey, this rationality assumption is focused too intently on the virtue of prudence, and not enough on other human motivations/virtues such as justice and charity.
Relaxing that assumption and allowing for non-utilitarian, non-prudence-myopic models of human motivation and behavior has done a better job of explaining private action and voluntary association in cases of disaster relief, and recently we have seen several more examples of such private action in this spring’s tornadoes. One of the best scholars of such private ordering and voluntary association, historian David Beito, is at the University of Alabama and was thus on the ground for the Tuscaloosa tornadoes in April. As he reports in Reason,
Tuscaloosa also became the scene of an inspiring, highly decentralized outpouring of volunteers and donations. Many of these arrangements could best be described examples of what Nobel prize-winning economist F.A. Hayek called “spontaneous order.” As Hayek put it, spontaneous orders result from the countless actions of individuals, who coordinate their actions through extended systems of voluntary cooperation, rather than the design of a single planner.
David recounts the efforts of University of Alabama students and other Tuscaloosa locals to provide a wide range of assistance to those whose homes were destroyed in the tornadoes. One of the interesting aspects of assistance that he highlights is the role of talk radio in providing information and coordinating the efforts of the benevolent with the needs of the storm’s victims. In some cases this assistance included people who argue against illegal immigration including Spanish language announcements and providing other help to illegal immigrants whose homes had been destroyed. The kind of help he describes is not unique to Tuscaloosa in 2011, which indicates how flawed the public good/free rider model is for understanding the supply of disaster relief.
A second example comes from the tornadoes in Joplin, Missouri in May. As Steve Horwitz points out at Coordination Problem, for-profit firms put extra effort into getting their products to Joplin … not to charge exorbitant prices for them, but to give them away at zero price. Procter & Gamble brought a slew of Duracell batteries and devices and a Tide Loads of Hope mobile laundromat, so that storm victims could at least have clean clothes and some semblance of normalcy while coping with the devastation around them:
Here is commerce meeting virtue: by giving away their product, they have enabled people to navigate a terrible situation with one less thing to worry about and to at least have the dignity of clean clothes while they rebuild the rest of their lives.
Capitalism makes it possible to engage and deploy the whole range of bourgeois virtues.
In that post Steve also links to some of his work on private action and voluntary association in New Orleans in the wake of Hurricane Katrina, which is outstanding and that I recommend to you highly. For example, the actions that Walmart took to leverage their expertise in supply chain logistics and to allow their employees to accumulate extra vacation time by working there are particularly striking.
Not only does capitalism make it possible to engage and deploy bourgeois virtues — it also makes firms and individuals forward-looking, which enables both reputation mechanisms and reciprocity to join with those virtues to motivate firms and individuals to contribute to disaster relief in ways that the standard neoclassical public good model cannot capture.