A Burmese reminder

The cyclone in Burma reminds us of the misery inflicted by human disasters as much as natural ones. The (all too common) human disaster of totalitarian governments leaves people trapped under regimes which think that they know best. They know best how to plan and run the economy, they know best where people should live and what they should do, they know best how people should conduct their personal, cultural and spiritual lives, and they know best how to meet what nature throws at them.

Except they don't. They don't have a thriving economy because, as Hayek showed us, information is over-concentrated at the centre, and decisions are out of date or just inappropriate by the time they get out to the sticks. And they are unable to deal with natural disasters for much the same reason: information is slow to get to the decision-making centre, slow to be processed by the bureaucracy, and slow to get acted on. Economic backwardness, and the fact that capitalism is seen as a threat means that there is less capital – trucks, helicopters, cranes, hospitals, utilities – that can be focused on dealing with natural disasters.

Richer countries, by contrast, can build more strongly, defend themselves from storms, floods and earthquakes more effectively, and repair the damage more quickly. There is more capital to throw at the problem, more decisions are made locally, and more people are willing to get stuck in without waiting for the government to tell them what to do. If you want an example, remember the Hurricane Jeanne in 2004 that killed over 3000 people in poor Haiti but only 5 in rich Florida.

And yet, some people seem determined to compound the misery by keeping poor countries poor – refusing their imports in order to protect our own manufacturers, or demanding that they rein back industrial development in case it pollutes the atmosphere. If you really want to help the planet and the lives and welfare of all who live in it, my prescription would be liberal democracy and free trade. That's the best form of aid we could give to anyone.

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written by Steve Giess, May 14, 2008

Quote: "information is slow to get to the decision-making centre, slow to be processed by the bureaucracy, and slow to get acted on"

In addition to these valid points one can add that as the information flows up the bureaucratic chain, so information is lost causing incorrect decisions to be made.

This loss is caused by having to compress a page of writing into a paragraph, and then that paragraph into a sentence. Each boss has to process the work of 10 (say) minions and then in his turn pass a precis upwards to his boss who has to do the same reduction. This lossy compression is intrinsic to any hierachical system. Hence the validity of any final decision by 'the great leader' is going to depend upon whether critical information has been winnowed out on its upward journey.

This system theory viewpoint has its uses. You can start to see why there are limits on the size of any sucessful extended enterprise - eg the size of the Roman empire (it got too large to react in a timely fashion to external events), and many others with a similar intrinsic structure.

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written by Mark Wadsworth, May 14, 2008

This is actually a planning disaster - you shouldn't build so many houses at sea level on a coastal flood plain - see also Canvey Island, New Orleans, Tsunami in Indonesia/Thailand a couple of years ago (earthquake) and a century before that (Krakatoa) etc etc.

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written by Not an Economist, May 15, 2008

China has just had a natural disaster. It is still largey centralised is it not? Private property in China does not have the security it has in the UK. And yet the Chinese govt has responded in excellent fashion to the recent earthquake. Far better for instance than the American govt's response (thru FEDRA) to Katrina which was widely condemned. How would you explain China's success given your comment that centralised country's

" ... are unable to deal with natural disasters for much the same reason: information is slow to get to the decision-making centre, slow to be processed by the bureaucracy, and slow to get acted on".

Surely this is just a case of how well managed and organised a govt is. Burma was rubbish but the Chinese are better at it. Hayek's knowldedge/information argument is very limited in its usefulness here surely. Its too generalised.

I may have misseed your point so please explain if I have.

Written by Dr Eamonn Butler
Wednesday, 14 May 2008
The cyclone in Burma reminds us of the misery inflicted by human disasters as much as natural ones. The (all too common) human disaster of totalitarian governments leaves people trapped under regimes which think that they know best. They know best how to plan and run the economy, they know best where people should live and what they should do, they know best how people should conduct their personal, cultural and spiritual lives, and they know best how to meet what nature throws at them. Except they don't. They don't have a thriving economy because, as Hayek showed us, information is over-concentrated at the centre, and decisions are out of date or just inappropriate by the time they get out to the sticks. And they are unable to deal with natural disasters for much the same reason: information is slow to get to the decision-making centre, slow to be processed by the bureaucracy, and slow to get acted on. Economic backwardness, and the fact that capitalism is seen as a threat means that there is less capital – trucks, helicopters, cranes, hospitals, utilities – that can be focused on dealing with natural disasters. Richer countries, by contrast, can build more strongly, defend themselves from storms, floods and earthquakes more effectively, and repair the damage more quickly. There is more capital to throw at the problem, more decisions are made locally, and more people are willing to get stuck in without waiting for the government to tell them what to do. If you want an example, remember the Hurricane Jeanne in 2004 that killed over 3000 people in poor Haiti but only 5 in rich Florida. And yet, some people seem determined to compound the misery by keeping poor countries poor – refusing their imports in order to protect our own manufacturers, or demanding that they rein back industrial development in case it pollutes the atmosphere. If you really want to help the planet and the lives and welfare of all who live in it, my prescription would be liberal democracy and free trade. That's the best form of aid we could give to anyone. Bookmark Comments (3) Subscribe to this comment's feed ... written by Steve Giess, May 14, 2008 Quote: "information is slow to get to the decision-making centre, slow to be processed by the bureaucracy, and slow to get acted on" In addition to these valid points one can add that as the information flows up the bureaucratic chain, so information is lost causing incorrect decisions to be made. This loss is caused by having to compress a page of writing into a paragraph, and then that paragraph into a sentence. Each boss has to process the work of 10 (say) minions and then in his turn pass a precis upwards to his boss who has to do the same reduction. This lossy compression is intrinsic to any hierachical system. Hence the validity of any final decision by 'the great leader' is going to depend upon whether critical information has been winnowed out on its upward journey. This system theory viewpoint has its uses. You can start to see why there are limits on the size of any sucessful extended enterprise - eg the size of the Roman empire (it got too large to react in a timely fashion to external events), and many others with a similar intrinsic structure. ... written by Mark Wadsworth, May 14, 2008 This is actually a planning disaster - you shouldn't build so many houses at sea level on a coastal flood plain - see also Canvey Island, New Orleans, Tsunami in Indonesia/Thailand a couple of years ago (earthquake) and a century before that (Krakatoa) etc etc. ... written by Not an Economist, May 15, 2008 China has just had a natural disaster. It is still largey centralised is it not? Private property in China does not have the security it has in the UK. And yet the Chinese govt has responded in excellent fashion to the recent earthquake. Far better for instance than the American govt's response (thru FEDRA) to Katrina which was widely condemned. How would you explain China's success given your comment that centralised country's " ... are unable to deal with natural disasters for much the same reason: information is slow to get to the decision-making centre, slow to be processed by the bureaucracy, and slow to get acted on". Surely this is just a case of how well managed and organised a govt is. Burma was rubbish but the Chinese are better at it. Hayek's knowldedge/information argument is very limited in its usefulness here surely. Its too generalised. I may have misseed your point so please explain if I have. Write comment This content has been locked. You can no longer post any comment. Powered by Azrul's Jom Comment for Joomla!