The Federal Emergency Management Agency (FEMA) is often times cited by progressives and RINOs as an example of the wondrous successes of big government. Interestingly enough, Gary Johnson also counts himself among the program’s supporters. During his Presidential bid in 2012, Johnson stated that FEMA fell under the “basic notion” of “the government protecting us”. Johnson continued on, stating that “without the federal government, states aren’t as well equipped” in the case of natural disasters.

However, both the private sector as well as state governments actually do have positive track records with responding to natural disasters – often times much more quickly and effectively than the federal government, at that.  Take the case of Hurricane Katrina, for example. The Red Cross was readily administering aid, preparing over 200 shelters for thousands of evacuees on the day the storm hit land. The organization also prepared and served over 50 million meals to survivors of the hurricane. However, FEMA hampered the organization’s efforts in some places. For example, the Red Cross was prevented by FEMA from entering the Superdome to deliver emergency aid.

Walmart prepared a response in an organized and speedy fashion, bringing supplies to those in need of aid within the city. The corporation had planned for days before Hurricane Katrina made landfall, stationing supplies to be immediately distributed. According to the Washington Post, Walmart delivered an unrivaled $20 million in pure donations as well as enough food for 100,000 meals. Again, FEMA could be seen hampering Walmart’s relief efforts. In one incident, FEMA agents turned away Walmart trucks loaded with bottles of water.

The National Guard also played an important role in establishing order during the disastrous flooding within New Orleans. Roughly 50,000 Guardsmen were deployed from several different states to provide relief to those in distress – ranging from enforcing law to administering medical treatment.

What was the key to the state government and the private sector’s success? In short, detailed knowledge and information. Walmart employees and National Guardsmen were much more familiar with the nuances of the city and the conditions and were thus able to coordinate their efforts more efficiently as a result.

However, there remains a glaring problem with the program that ought to be addressed. Through FEMA, the federal government actively “re-invests” (or rather, taxes and spends) money within areas that are affected by natural disasters – businesses, houses, and what have you. Imagine for a moment, if you will, how that might affect an individual’s choices when deciding where to purchase property or make an investment. If an investor knows that the government will step in and grant him a generous re-investment in the case of a natural disaster, he will be much less likely to account for risks of natural disasters when making his decision. Put differently, he will be more likely to invest in areas with a higher rate of natural disasters. The government effectively incentivizes investment in risky regions – with the taxpayer writ large paying the costs of destroyed property and risky decision making. In the jargon of political science and economics, this is an example of what is called the “moral hazard” problem.

If FEMA did not actively provide such re-investment funding, investors and other individuals would likely make different choices as to what regions they invest capital in or where they purchase their homes. State and local governments would have incentives to economize on their resources in order to provide more effective relief efforts.

This is not to say that government might not be able to play a role in the case of a natural disaster. The issue I am mostly concerned with here is the centralized nature of FEMA and the moral hazard problem it creates. Centralization has a bad track record because those individuals who are in charge of the planning have very incomplete knowledge and information – and FEMA is no exception. Organizations that are largely decentralized in nature (the Coast Guard, for example) would be much more successful in carrying out relief efforts due to having more localized knowledge and not having to navigate through a labyrinth of red tape in order to make decisions and take action.

While some may insist that FEMA is a necessary government program, history informs us that faith in centralized government is a religion grossly misguided in fundamentals.