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Thought experiment: Will the stalled reconstruction of New Orleans teach Americans a valuable lesson?

We’re back around to the anniversary of Hurricane Katrina, so naturally there is a lot of press coverage provoking a lot of questions — indeed, questions other than “Will the Katrina retrospectives end with the Bush presidency?” In particular, the press is full of stories about the delays in rebuilding New Orleans, as if a city 250 years in the making ought to have been rebuilt in even two years. Still, much depends on who is doing the reconstructing. USA Today has a front-page story that is not the least bit surprising to anybody who would read this blog:

Two years after the devastating floods that followed Hurricane Katrina, the rebuilding of New Orleans, and much of the Gulf Coast, has largely taken two paths: communities that have rebuilt themselves using private funds, insurance money and sheer will — and publicly funded efforts that have moved much more slowly.

Now, economists have long observed that certain kinds of insurance schemes create a “moral hazard” if they cause the insured to take on risks that are inconsistent with the original intentions of the insurer. For example, if we insure deposits in banks, then depositors might shift their money to financial institutions with weaker balance sheets because they pay higher interest — the decision to take on more risk is “free” to the borrower because of the government deposit insurance, and therefore a “moral hazard.” Similarly, if the availability of government flood insurance actually causes more people to build in places prone to flooding, then it has not only shifted the risk of people who unwittingly find themselves — because of coastal erosion or a change in the course of a river, for example — in that position but it has increased the total risk taken on.

There is another idea, originating in conservative public policy circles, that is a close relative of moral hazard: dependency. The idea is that people who rely on the government to take care of them lose the ability to take care of themselves.

So, my question for your discussion should now be obvious: Since people all over the United States have now seen that government flood insurance and disaster relief is far from effective, will they be less likely to take on risks notwithstanding a subsidized government insurance scheme? Will they be more likely to rely on themselves to rebuild their houses and their lives notwithstanding the promises of politicians that governments will do it for them? Will Americans become more self-reliant because Katrina has taught them that they must be? Finally, if you answer “no” to any of these questions and yet you claim to be opposed to “big government,” reconcile the inconsistency.

Release the hounds.

[Cross-posted at TigerHawk.]

Topics: Uncategorized

  Posted by Tigerhawk at 8:27 am on Wednesday, August 29, 2007

8 Responses to “Thought experiment: Will the stalled reconstruction of New Orleans teach Americans a valuable lesson?”

1. The_Real_JeffS Says:
   August 29th, 2007 at 9:58 am

   “..will they be less likely to take on risks notwithstanding a subsidized government insurance scheme?”

   No. Largely because many people — emotionally speaking — don’t accept the concept of risks. They want that nice new home, and the fact that the location has been known to flood before is ignored. After all, it’s not flooding now, is it? Many people simply don’t — or can’t — plan for the long term in this regards.

   Or they don’t understand just what the risk is. “Flood plain” and “floodway” might as well be part of theoretical physics. And don’t get me started on “100 year flood event”! What makes this worse is that some banks and realtors gloss over this risk in order to complete the sale, and hype living near a pretty river instead.

   Finally, there’s too much at risk for many local governments. New homes mean a larger tax base, which, in turn, means a larger economy. Hence construction in flood prone areas is often encouraged with little regards for the longterm consequences. Don’t get me wrong — flood plain construction is possible with the proper designs. It’s just that no one seriously addresses the possibility of flooding (sometimes with the exception of a few, often ignored, emergency management officials) during development.

2. AW1 Tim Says:
   August 29th, 2007 at 10:14 am

   Shipmate,

   A similar situation occurs with regularity out in Utah. Up in Cache Valley, for many years now, the upper-income folks from California have been relocating and building expensive homes up on the mountainsides and benches.

   Now, every native there knows that those benches are made up of soil and other material that has eroded from the mountain sides. No problem for the builders. they could care less because they are “beautiful people” and have large banrolls, etc. They simply want the prestige of the good view. their view of the valley, and other’s view of that expensive home up on the hillside.

   Suffice to several have been relocated, sliding down the hillside, usually in several pieces. The last one found the new owner threatening to sue the County, Codes officers,e tc, for “allowing” him to build there without proper warning of the hazards. Idiots…. Yet he is rebuilding, and like Jeff says, it’s being approved because the County only sees the tax money.

   Liberals will always have a plan for everything. They will NOT however, take responsibility for anything, except success. To them, they are the “idea people” it’s alwats up to someone else to implement the plan, to take the risks, and, ultimately, suffer when things go bad. As they usually do.

   New Orleans ought to be studied and shown for what it is: The direct result of allowing liberals to govern.

   Respects,
   New Orleans reflects what will happen in any disaster to an area steeped in the traditions of the left’s governmental ideas. New Orleans shpws the results of several generations of liberal thinking, telling folks that “it’s not your fault” setting up “programs” to help them with the problems, and basically absolving the citizens of any responsibility for their own lives.

   It starts in the schools where the children are brainwashed into accepting the iron heel of government control, of government knowing what’s best for them, like a paternal overseer. They are taught that nothing is ever their fault, and that government will help them. Government subsidizes their rent, gives them foodstamps for suuport, provides medical care, and then even picks them up to take them to appointments.

   Is it any wonder that, when disaster struck, they sat at home and waited for the government to come and get them? Rather than heed the warnings, and pack a bag, walking to safety if needs be, they stayed put. They sat in place as they were trained to do, and many died as a result.

   What happened then? Well, the LOCAL government complained that “it isn’t OUR fault” and blamed the state. The state claimed “It isn’t OUR fault” and blamed the federal government. See a pattern here?

3. Vanguard of the Commentariat Says:
   August 29th, 2007 at 11:08 am

   Good post AW1. You must’ve been a non-tac before you went AW!

   Old HC-11 guy here.

4. bird dog Says:
   August 29th, 2007 at 12:12 pm

   Good piece. Thanks for introducing me to “moral hazard.”

   My opinion is that flood insurance should be purely market-based. That is the only way that risk can be properly and fairly priced.

   Of course, living below sea-level only makes sense for fish, turtles, and crocs, in my view - but if anyone wants to pay the premium for the risk, well, why not?

5. Grimmy Says:
   August 29th, 2007 at 3:45 pm

   I agree with the moral hazard concept and the harm it can cause. Unintended consequences are one thing, but what happened to NO is, in my opinion, something different.

   NO has long been synonymous with idiocy in the extreme in terms of governance. NO has been run by generations of thieves posing as politicians. The corruption and graft was beyond lampoonage.

   The citizens of NO played the game and had their fun with their “traditions” of grotesquely incompetent leadership and now they’re burned by it.

6. Vanguard of the Commentariat Says:
   August 29th, 2007 at 4:21 pm

   Headline should read: Will the stalled reconstruction of New Orleans teach New Orleans a valuable lesson?

   I think we are in the process of answering that in the negative.

   Now I am waiting for Corndog to show up and remind me of my cold, cold heart.

7. El Cid Says:
   August 29th, 2007 at 7:55 pm

   Cheer up folks…Naw’leans is bitching again….

   http://news.yahoo.com/s/ap/20070829/ap_on_re_us/katrina_anniversary

   Snippets…

   “There was supposed to be all this money, but where’d it go? None of us got any,” said Russ, whose house was the only restored home on an otherwise desolate block.

   Ask your corrupt local, parish and state officals, asshole.

   But Gina Martin, who is still living in Houston after Katrina destroyed her New Orleans home, was unconvinced. “Bush was down here again making more promises he isn’t going to keep. The government has failed all of us. It’s got to stop,” she said.

   I agree…as soon as you rebuild ABOVE Sea Level…otherwise, back to France you go….Well we could always give you to Quebec, sweetheart.

   Martin was among an estimated 1,000 people taking part in a protest march that started in the Lower 9th Ward. It was a uniquely New Orleans-style protest: There were signs accusing the Bush administration of murder and angry chants about the failure of government. But marchers also danced in the street accompanied by two brass bands.

   Since you still aren’t prepared for the next one. Since even though your State had a plan in place and had just weeks berfore Katrina, DIDN’T FOLLOW IT. Since your Mayor, would still leave buses stranded in water, while he scoots of to Texas, you’re screwed sweetheart.

   My suggestion, use the two brass bands to plug the holes in the levees next time…They weren’t built correctly from the beginning…and with every damn person in politics in Louisiana digging at the money that the rest of the U.S. Taxpayers sent prior to and scads after…(not including donations you silly bitch)…I vote for Quebec.

8. AW1 Tim Says:
   August 30th, 2007 at 9:33 am

   Van,

   heh. I spent three years in the Army as an 11b before shipping over to the Navy. Did time in both helos and P-3’s. Good duty, that. :)

   Sorry about the spelling errors. Sometimes my fingers get ahead of my old eyes…….

   Respects,

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