I am a fan of just banning new construction in areas that are major flood risks because of the political constraints.
There are three ways that you can deal with issues like periodic flooding, either you 1) tell people they knew what they were getting into and are on their own to find private insurance/support and rebuild, 2) force people to take out flood insurance if they live in these areas to make sure the general tax payer isn't on the hook, or 3) just ban new construction in these areas, and move people out of them over time.
The issue with number one is that flood events by definition are largish and not very regular (if the lot flooded twice a year no one would build on it). So they are following extreme weather events, dam failures, etc., and there are zero politicians who are going to say after a hurricane, you made your choices tough shit. At least not if they want to continue being politicians. Bush Jr just made a poor transit decision during one of these events, and he took a bigger hit to his standing in the country than from either the war on terror, or the war on social security. So there is no governor who when faced with major flooding is going to be the one telling survivors they are SOL.
So why not take route two, and just insure against the risks? The problem is that the rates will never be large enough to accurately price the risk, because again these are by large and irregular events. The bureaucracy and politicians don’t have a strong incentive to make these programs solvent since most years claims are low, and they know that if a massive disaster does strike the government will backstop the program. So over time it is easier to acquiesce to lower rates, or not keep them in pace with inflation, or to not increase them to track increased risks. So even if after a massive disaster they raise the rates to make sure “this doesn’t happen again”, all of the human and economic incentives over the proceeding 10-20 years is for them to fall out of alignment again.
So given that failure is basically inevitable, I prefer option three, which is just banning habitation and commercial construction in these areas. It hurts my neoliberal soul to not just use prices to solve the problem, but given political constraints your real options are either have the taxpayer bail these areas out every 15-25 years, or just stop people from living there, and door two seems more rational.
There is also an interesting comp here with healthcare provision, since it also suffers from similar political constraints, which make insurance an ineffective solution.
I am a fan of just banning new construction in areas that are major flood risks because of the political constraints.
There are three ways that you can deal with issues like periodic flooding, either you 1) tell people they knew what they were getting into and are on their own to find private insurance/support and rebuild, 2) force people to take out flood insurance if they live in these areas to make sure the general tax payer isn't on the hook, or 3) just ban new construction in these areas, and move people out of them over time.
The issue with number one is that flood events by definition are largish and not very regular (if the lot flooded twice a year no one would build on it). So they are following extreme weather events, dam failures, etc., and there are zero politicians who are going to say after a hurricane, you made your choices tough shit. At least not if they want to continue being politicians. Bush Jr just made a poor transit decision during one of these events, and he took a bigger hit to his standing in the country than from either the war on terror, or the war on social security. So there is no governor who when faced with major flooding is going to be the one telling survivors they are SOL.
So why not take route two, and just insure against the risks? The problem is that the rates will never be large enough to accurately price the risk, because again these are by large and irregular events. The bureaucracy and politicians don’t have a strong incentive to make these programs solvent since most years claims are low, and they know that if a massive disaster does strike the government will backstop the program. So over time it is easier to acquiesce to lower rates, or not keep them in pace with inflation, or to not increase them to track increased risks. So even if after a massive disaster they raise the rates to make sure “this doesn’t happen again”, all of the human and economic incentives over the proceeding 10-20 years is for them to fall out of alignment again.
So given that failure is basically inevitable, I prefer option three, which is just banning habitation and commercial construction in these areas. It hurts my neoliberal soul to not just use prices to solve the problem, but given political constraints your real options are either have the taxpayer bail these areas out every 15-25 years, or just stop people from living there, and door two seems more rational.
There is also an interesting comp here with healthcare provision, since it also suffers from similar political constraints, which make insurance an ineffective solution.