June 23, 2014 11:45AM

Can Private Disaster Relief Work?

In a new paper, Emily Skarbek (King’s College London) presents some evidence:

Using a novel set of comprehensive donation and expenditure data collected from archival records, this paper examines a bottom‐​up relief effort following one of the most devastating natural disasters of the nineteenth century: the Chicago Fire of 1871. Findings show that while there was no central government relief agency present, individuals, businesses, corporate entities and municipal governments were able to finance the relief effort though donations. The Chicago Relief and Aid Society, a voluntary association of agents with a stake in relief outcomes, leveraged organizational assets and constitutional rules to administer aid.

This contrasts sharply with conventional wisdom and current public policy, which assumes that private agents and local governments will “free ride” on the charitable actions of others, leading to “insufficient” relief activity unless the central government plays a large role.

In fact, private and local government efforts are often substantial, as demonstrated by this example and many others (e.g., the billions given by individuals, foundations, and corporations to help victims of Katrina, Sandy, and the Asian Tsunami).

Local efforts, moreover, are likely more efficient than those directed by a far away central government, as residents of New Orleans can readily attest.