Supply Demand

Economics Handling an epic crisis requires a swift response and a high level of organization and efficiency. It also requires the ability to meet the needs of a large number of stakeholders, whose situations and needs might be quite diverse in nature. A capitalist economic system should have a fairly high level of efficiency, but that efficiency tends to develop over time -- you don't become Wal-Mart overnight.

During Katrina, one of the first companies on the scene was FedEx, which used is high level of organization and efficiency to provide goods to the area (FedEx, 2005). The drawback to this system is that while it allows for altruism and community service, it is not oriented towards it. FedEx can deliver medical supplies but it cannot reunite families or repair damaged neighborhoods. While in theory there could be a private disaster-relief company that operates privately, in practice the payer is going to be government.

And where government cannot pay -- Haiti for example - such a system would be hopeless. But in a country like Haiti where government is inept, a socialist or even Communist system would also be useless. A more socialistic economic system is essentially irrelevant to the execution of disaster relief. Here's why: disaster relief tends to be a public good anyway. It is something that is typically socialized. Various branches of the military often make strong contributions, and disaster relief agencies are usually charged with things like coordination.

Volunteer groups -- encouraged equally under capitalism and socialism -- are also major players in disaster relief. Further, there is nothing inherently inefficient about government-run services (i.e. The military). They are more directly oriented towards things like disaster relief, but again as a public good they are not going to be private companies anyway. The bottom line is that disaster relief is about good management, training, organization and responsiveness. This is something that can exist in any economic system.

The question of payment is moot since government is always going to be the payer, even when disaster relief is done on a for-profit basis. If anything, the profit element in for-profit disaster relief represents the most significant inefficiency -- look to the skyrocketing costs of health insurance, the prison system or other forms of private enterprise as examples of how profit-taking represents a far greater drag on efficiency than anything else, especially in something like disaster relief where the market will not be sufficiently competitive. 2.

Stepping away from economic efficiency and considering only human outcomes, in theory a socialist system would be better for the Haitian earthquake relief. This assumes equal quality of management, funding and organization between socialism and capitalism. This is because the need for profits in the capitalist system diverts some of the funding. There is no guarantee that these diverted funds will be made up for with superior efficiency, so total output will be lower in the capitalist system.

Moreover, the socialist system may be more attuned to the specific social outcomes of the people needing relief. Whether that affects performance or not is tough to say -- you can get pretty good health care if you're willing to pay the price so a capitalist system is capable of delivering high quality human outcomes. But the market for disaster relief in a capitalist system is unlikely to be competitive, meaning that profit-taking will be sufficient to drag on overall effectiveness. 3.

The cost to heat homes rises in the winter because the price elasticity of demand declines in winter. Supply and demand is not as big a factor as is made.