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The role of local entrepreneurs in recoveries

October 5, 2016 at 12:02 pm
By Marissa Robertson’20

Laura Grube FacForum

Laura Grube’08, an assistant professor of economics, presents her research on the role of the local entrepreneur after a disaster at a Faculty Forum held in September.

 

In 2005, a category four hurricane ripped through the Gulf Coast of the United States. At 400 miles across and with 100 to 140 mile-per-hour winds, Hurricane Katrina tore through New Orleans’ levee system and left some neighborhoods with over 12 feet of water. More than 1,800 lives were lost and over $100 billion of damage was inflicted on the region. Just seven years later, Superstorm Sandy brought similar destruction to the East Coast. Some residents of the area were left without power for over two weeks. Subways flooded and homes and business were ripped from the ground, leaving only cement foundations as the waters receded.

Years later, these areas have managed to fight their way to recovery, rebuilding and repopulating neighborhoods and communities some suspected would be abandoned in the wake of such devastation. But how did this happen?          

This is the phenomenon Laura Grube’08, an assistant professor of economics, sought to explore, researching the role of the local entrepreneur in the midst of crisis. Grube and Virgil Storr’96, senior research fellow and senior director of academic and student programs at George Mason University’s Mercatus Center, and Stefanie Haeffele-Balch, deputy director of academic and student programs, also at the Mercatus Center, interviewed members of the communities struck by these disasters, asking them about their neighborhoods before the storms, if they evacuated or not, and any efforts they made after to return to normalcy.          

At a Faculty Forum presentation at Beloit in September, Grube compared the pressures the devastated and abandoned communities faced in economic terms, asserting that the dilemma left after so much destruction is a collective action problem. There are two choices, one that may be the socially desirable result, and one that benefits the individual, which may prevent the optimal result from taking place.  While the logical choice for the individual is to wait and see how the community fares without investing in a risky return, Grube and her team discovered that entrepreneurs were able to affect the cost-benefit analysis and encourage residents to return.          

During her presentation, she explored three case studies in which members of the community worked toward recovery, where the traditional economic motivators of profit through financial gain were augmented through positive feedback from their community.

 Through their involvement in community organizations and businesses, these entrepreneurs were able to serve in three key roles: providing needed goods and services, restoring social networks, and becoming a focal point for recovery.Rabbi Boruch Bender from the Rockaway peninsula used his organization, Achiezer, to distribute aid among the community, raising $11 million dollars for recovery efforts.

Latoya Cantrell, president of the Broadmoor Improvement Association, worked towards a similar goal in New Orleans. BIA used its records to contact residents and illustrate the viability of returning, gathering other churches and community organizations to create their own plan for rebuilding, resulting in an impressive 82.2 percent of residents returning, 6.2 percent higher than the city’s average. Similarly, Casey Kasim, a small business owner in New Orleans’ Lower Ninth Ward, returned to reopen his gas station/convenience store in order to bring a sense of normalcy back to the neighborhood.

Grube asserts that this research builds on entrepreneurship theory in its exemplification of individual action impacting larger social phenomenon. Grube combines economists Israel Kirzner and Joseph Schumpeter’s theory of entrepreneurship. The group’s research provides an escape from homo economicus, or “economic man,” a concept which ignores social context, examining instead the success of entrepreneurs in market and non-market situations.

The trio’s research is published in a book titled Community Revival in the Wake of Disaster: Lessons in Local Entrepreneurship (Palgrave Macmillan). Beloit’s economics department will be sponsoring a series of discussions in November, covering similar topics with guest, Deirdre Nansen McCloskey, the 2016 Miller Upton Scholar, along with other Beloit professors and alumni.