Shaking Things Up in New Orleans

When hurrican Katrina hit New Orleans in 2005 much of the city was wiped out. In the chaos following the disaster the population dropped in half. Even in 2012, the city is only back to 80% of its former size.

But there was a bright spot in all the bad news. The city was decimated, but so was the city government. This provided an opportunity for the government to improve, as predicted by Mancur Olson’s theory of institutional sclerosis.

Olson’s theory predicts that governments affected by a disaster will develop better institutions afterwards and prosper for awhile. The mechanism behind this effect is “institutional sclerosis”. As a political unit is stable over time, it accumulates more laws and institutions designed for the benefit of special interests at the expense of the general interest. Gradually, economic growth is choked off as public resources are siphoned to special interests. Furthermore, the problem becomes harder to fix over time, since more people reaping benefits from bad laws means a larger population incentivized to fight reforms. Disasters function like pushing a giant reset button, giving political units a chance to change their calcified institutions as old interest groups are thrown into disarray.

The New Orleans school system was a typical failing impoverished inner city district prior to the hurricane. Following the hurricane, the city government was hard pressed to find staff to keep the schools open. So they outsourced school management to charter school companies, tearing up the old school union contracts and firing thousands of tenured incumbent school teachers in the process. The results have been encouraging:

Education Secretary Arne Duncan said Sunday that 2005’s Hurricane Katrina was “the best thing that happened to the education system in New Orleans,” since it forced the failing school system to start over from scratch.

“I think the best thing that happened to the education system in New Orleans was Hurricane Katrina,” Duncan said. “That education system was a disaster, and it took Hurricane Katrina to wake up the community to say that ‘we have to do better.’ And the progress that they’ve made in four years since the hurricane is unbelievable. They have a chance to create a phenomenal school district.

80% of students now attend charters in New Orleans, by far the largest experiment in charter schools in the country. The rate of “failing”  schools in the district by state standards has fallen in half, from over two-thirds to under a third. Graduation rates have improved by 20%. And test scores are up:

“The share of students proficient on state tests rose from 35 percent in 2005 to 56 percent in 2011; 40 percent of students attended schools identified by the state as “academically unacceptable” in 2011, down from 78 percent in 2005.”

Could this have happened through gradual reform of the old system? Experience tells us that it’s not very likely. Entrenched bureaucracies are effective at fighting reforms that threaten their interests .

While the future looks bright for New Orleans schools, in an ideal world we wouldn’t have to wait for horrible, deadly disasters to make beneficial changes to political structures. That’s why I seek ways to inject more dynamism into political meta-systems, and I advocate the introduction of benign, artificial instability by shaking up traditional boundary lines to prevent the gradual sclerosis of stable political systems.