Policy Primers TRSP PR POLICY AL SERIES
The objective of the Mercatus Policy Series is to help policy makers, scholars, and others involved inthe policy process make more effective decisions by incorporating insights from sound interdisciplinaryresearch. The series aims to bridge the gap between advances in scholarship and the practicalrequirements of policy through four types of studies:Policy Primers present an accessible explanation of fundamental economic ideas necessary to thepractice of sound policy.Policy Resources present a more in depth, yet still accessible introduction to the basic elementsof government processes or specific policy areas.Policy Comments present an analysis of a specific policy situation that Mercatus scholars haveexplored and provide advice on potential policy changes.Country Briefs present an institutional perspective of critical issues facing countries in whichMercatus scholars have worked and provide direction for policy improvements.global prosperity initiativeAbout the Mercatus Policy SeriesMERCATUSPOLICYSERIESP o l i c yc o m m e n tn o. 2 4The Impact of FEMAReorganization:Implications for PolicyChristopher J. CoyneAssistant Professor of Economics, West VirginiaUniversity and Associated Research Fellow,Mercatus CenterPeter T. LeesonBB&T Professor for the Study of Capitalism, GeorgeMason University and Senior Scholar, Mercatus CenterRussell S. Sobel3301 North Fairfax Drive, Suite 450Arlington, Virginia 22201Tel: (703) 993-4930Fax: (703) 993-4935James Clark Coffman Distinguished Chair inEntrepreneurial Studies, West Virginia University andAffiliated Senior Scholar, Mercatus CenterFebruary 2009
About Christopher J. Coyne, authorAbout the Mercatus CenterChristopher J. Coyne is an assistant professor of economics at West Virginia University. He also serves as editor of TheReview of Austrian Economics and is a research fellow for the Mercatus Center at George Mason University. He is theauthor of the book After the War: The Political Economy of Exporting Democracy.The Mercatus Center at George Mason University is a research, education, and outreach organization that works withscholars, policy experts, and government officials to connect academic learning and real world practice.About Peter T. Leeson, authorPeter T. Leeson is BB&T Professor for the Study of Capitalism at George Mason University and associate editor of TheReview of Austrian Economics. Formerly, he was a Visiting Fellow in Political Economy and Government at HarvardUniversity and the F. A. Hayek Fellow at the London School of Economics. Dr. Leeson’s research explores the economicsof anarchy. His most recent work focuses on the economics of pirates. His paper, “An-arrgh-chy: The Law and Economicsof Pirate Organization,” was recently published in the Journal of Political Economy.Dr. Leeson is the author of The Invisible Hook: The Hidden Economics of Pirates. Dr. Leeson’s personal Web page, whichcontains links to his research on the economics of pirates and other work, is available at http://www.peterleeson.com.About Russell S. Sobel, authorRussell S. Sobel served as director of the West Virginia University Entrepreneurship Center from October 2002 untilFebruary 2006 when he was named James Clark Coffman Chair in Entrepreneurial Studies at WVU. He specializesin public economics. His work on the economics of FEMA received national attention in the aftermath of HurricaneKatrina in 2005, including articles in the New York Times and an appearance on CNBC. Professor Sobel’s research hasbeen published in many top journals, including the Journal of Political Economy, Economic Inquiry, Journal of EconomicPerspectives, Southern Economic Journal, Public Choice, National Tax Journal, Constitutional Political Economy, AtlanticEconomic Journal, Journal of Labor Research, Public Budgeting and Finance, and Journal of Public Finance and PublicChoice.Dr. Sobel received the 1996 Atlantic Economic Journal Best Article of the Year Award and the 1998 College of Businessand Economics Award for Outstanding Research. He is also interested in state and local public finance, legislative behavior, international organizations, and constitutional economics.Dr. Sobel earned a BA from Francis Marion College and an MS and a PhD from Florida State University.Senior Editor: Frederic SautetManaging Editor: Kyle McKenzieAssistant Editor: Heather HambletonPublications Manager: Jennifer ZamboneDesign: Joanna AndreassonISSN: 1943-6793Cover photo: Carrie ConkoThe mission of Mercatus is to promote sound interdisciplinary research and application in the humane sciences thatintegrates theory and practice to produce solutions that advance in a sustainable way a free, prosperous, and civil society. Mercatus’s research and outreach programs, Capitol Hill Campus, Government Accountability Project, RegulatoryStudies Program, Social Change Project, and Global Prosperity Initiative, support this mission.The Mercatus Center is a 501(c)(3) tax-exempt organization. The ideas presented in this series do not represent anofficial position of George Mason University.
The Impact of FEMA Reorganization:Implications for PolicyChristopher J. Coyne, Peter T. Leeson, and Russell S. SobelExecutive summaryThis policy comment discusses the impact and implications of the Federal Emergency ManagementAgency’s (FEMA) move from an independent agency with direct congressional oversight to an agencyunder the umbrella of the Department of Homeland Security (DHS) in 2003. As politics clearly plays arole in the allocation of FEMA funds. It is important to understand the political influence on the allocation of disaster relief. However, it is also important to understand the ways in which FEMA’s decisionshave changed since its reorganization in order to evaluate proposals to reorganize existing governmentagencies in the future.The fundamental ideas of this paper are as follows:1.There are two sources of political influence over the declaration of disasters and the allocation ofFEMA disaster relief: presidential influence over declaring disasters and congressional oversightof fund allocation.2.The presidential channel of political influence is as much at play today as before FEMA’s move.The political influence from the members of the congressional FEMA oversight committees hasbeen severed under the FEMA reorganization under the DHS.3.The change in congressional influence is due to the additional layers of bureaucracy with overlapping oversight over the DHS and thus FEMA.4.If one’s goal is to remove political influence from FEMA operations, the only way to do so is toreduce the involvement of political actors, effectively turning disaster relief and management overto private organizations and individuals.For more information about the Mercatus Center’s Social Change Project, visit us online,www.mercatus.org, or contact Claire Morgan, director of the Social Change Project, at (703) 993-4955 orcmorgan@gmu.edu.
The Impact of FEMA Reorganization:Implications for PolicyIly adept at preparing for and responding to terrorism, itwould likely become less effective in performing its current mission in case of natural disasters as time, effort andattention are inevitably diverted to other tasks within thelarger organization.”2 In contrast, former FEMA Director Michael Brown has argued that Americans would bebetter served under the new organizational structurebecause it would create a “FEMA on steroids” that wasfaster, more responsive, and more efficient.3IntroductionThe 9/11 attacks on the World Trade Center andPentagon led to major changes in the U.S. federal government. Perhaps the biggest change was the creationof the United States Department of Homeland Security(DHS) in November 2002. The purpose of the DHS wasto consolidate and streamline organizations related toU.S. homeland security into a single cabinet. A massivereorganization plan was announced with the goal ofincreasing the efficiency and responsiveness of government agencies in preventing and responding to futureterrorist attacks and disasters that threatened U.S. security. As part of this reorganization plan, the FederalEmergency Management Agency (FEMA) was placedunder the authority of the DHS in February 2003.In addition to questions surrounding the impact ofFEMA’s merger with the DHS, the FEMA reorganization raised another important issue. Specifically, howhas the reorganization impacted the political economy ofFEMA’s disaster-relief decisions? Politics clearly plays arole in decisions regarding the allocation of FEMA funds,and the political dynamics facing FEMA changed whenit was reorganized under the DHS. As such, it is important to understand how FEMA’s post-9/11 merger withthe DHS has impacted the federal government’s disaster-relief decision making. This is important not only forunderstanding the various influences on the allocationof disaster relief, but also for understanding the issuesassociated with future decisions to reorganize existinggovernment agencies.FEMA was created via executive order by President Carter in 1979. The new agency was created by merging several existing disaster-related agencies togetherincluding the Federal Insurance Administration, theNational Fire Prevention and Control Administration,the National Weather Service Community Preparedness Program, the Federal Preparedness Agency ofthe General Services Administration, and the FederalDisaster Assistance Administration activities from theU.S. Department of Housing and Urban Development.FEMA’s mission was “to lead America to prepare for,prevent, respond to and recover from disasters with avision of ‘A Nation Prepared.’1 FEMA remained an independent entity with direct congressional oversight untilit was merged into DHS in 2003.This policy comment explores the political economy ofthe FEMA reorganization and explains how FEMA-provided disaster relief is influenced by politics.4 The fundamental, policy-relevant ideas in this comment are asfollows: There are two sources of political influenceover the declaration of disasters and the allocationof FEMA disaster relief: presidential influence inthe process of declaring disasters and the influenceof congressional oversight in the allocation of disaster relief.The potential impact of FEMA’s merger with the DHShas been hotly debated. For instance, a report by theBrookings Institution that discussed the potential mergerargued that “while a merged FEMA might become high-1. FEMA website, http://www.fema.gov.2. Ivo H. Daalder, I. M. Destler, James M. Lindsay, Paul C. Light, Robert E. Litan, Michael E. O’Hanlon, Peter R. Orszag, and James B. Steinberg,Assessing the Department of Homeland Security (Washington, DC: Brookings Institution, 2002).3. Quoted in Jon Elliston, “A Disaster Waiting to Happen,” The Independent Weekly, September 22, 2004.4. This policy comments is based on Russell S. Sobel, Christopher J. Coyne, and Peter T. Leeson, “The Political Economy of FEMA: DidReorganization Matter?” Journal of Public Finance and Public Choice 17, no. 2/3 (2007): 49–65.Policy CommentMercatus Center at George Mason University1
The channel of political influence coming fromthe president, who determines whether a FEMAworthy disaster has occurred, is as much at playtoday, following the reorganization of FEMA underthe DHS, as it was before this merger.Economists typically assume that private individualsact in a purposeful manner to achieve their desired goalas best they can within the constraints they face. Publicchoice calls for the extension of this same assumption topolitics and political actors. Put slightly differently, public choice requires that we assume that political actors,just like private actors, pursue their own ends using thebest means known to them. This doesn’t mean that publicactors never behave in an other-regarding manner, butinstead highlights that public actors, like private actors,tend to identify with their own wants and concerns ratherthan those of others. The political influence coming from congressional influences, namely membership on FEMAoversight committees, has been severed by FEMA’srecent reorganization under the DHS. The change in the influence of congressionaloversight is due to the introduction of additionallayers of bureaucracy with overlapping areas ofoversight over the DHS and thus over FEMA.The reorganization has diminished the powerand importance of any particular committee withFEMA oversight capacity, making it difficult forcongressional committee members to appreciablyinfluence disaster-relief resource allocations favorably for themselves.This has important implications for the study and understanding of the public sector. It cannot simply be assumedthat political actors pursue the “public interest.” Instead,focus must be placed on political institutions and rulesand the incentives they create. A central insight frompublic-choice theory is that public actors, just like privateactors, respond to incentives. The rules created by political institutions will provide incentives for political actorsto engage in certain kinds of behavior. Understandingthese incentives is critical for understanding the behavior of political actors as well as political outcomes.This policy comment is organized as follows. We firstdiscuss a framework for analyzing the public sector andthe behavior of government actors. We then explainthe sources of political influence over the operationsof FEMA. Next, we consider the empirical evidenceregarding these sources of influence. Particular emphasis is placed on the changes in the influence of congressional oversight following the 2003 merger of FEMAwith the DHS. We then explore the political economyof bureaucracy to explain the change in the influence of congressional oversight committees. We conclude witha discussion of the main policy implications.2For the purposes of this policy comment, we are concerned with how the incentives facing political actorschanged following the merger of FEMA with the DHS.In order to do
Dr. Leeson’s research explores the economics of anarchy. His most recent work focuses on the economics of pirates. His paper, “An-arrgh-chy: The Law and Economics of Pirate Organization,” was recently published in the Journal of Political Economy. Dr. Leeson is the author of The Invisible Hook: The Hidden Economics of Pirates. Dr. Leeson .
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