Hurricane Katrina and the levees: taxation, calculation, and the matrix of capital

Abstract

Purpose

The purpose of this paper is to analyze the havoc created by Hurricane Katrina from the viewpoint of Austrian Economics. The aim is to look specifically at the malinvested capital that came about because of the construction of the complex levee system around New Orleans.

Design/methodology/approach

The paper applies Austrian Economics, and especially the economic analysis of Carl Menger.

Findings

It is found that there indeed was much malinvested capital in New Orleans, and the situation was made worse because the levee system upon which everything else depended was unfit to withstand a storm the size of Katrina.

Research limitations/implications

Research implications include the examination of other situations in which large amounts of government capital help to leverage other investments, but the original government capital itself proves to be unsustainable.

Practical implications

The practical implications include a warning to people who we believe should base large amounts of private investment upon government projects that have a political basis, but either cannot withstand natural forces or simply are untenable.

Originality/value

The new aspect of this paper is the larger‐scale application of Austrian business cycle theory to a specific instance, as opposed to applying it to the economy at large.

Citation

Anderson, W. and Kjar, S.A. (2008), "Hurricane Katrina and the levees: taxation, calculation, and the matrix of capital", International Journal of Social Economics, Vol. 35 No. 8, pp. 569-578. https://doi.org/10.1108/03068290810889198