Hurricane Sandy, and Why Sound Risk Management Should Always Trump Populist Banner Waving

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Tod Kelly

Tod is a writer from the Pacific Northwest. He is also serves as Executive Producer and host of both the 7 Deadly Sins Show at Portland's historic Mission Theatre and 7DS: Pants On Fire! at the White Eagle Hotel & Saloon. He is  a regular inactive for Marie Claire International and the Daily Beast, and is currently writing a book on the sudden rise of exorcisms in the United States. Follow him on Twitter.

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90 Responses

  1. Nob Akimoto Nob Akimoto
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    says:

    All in all, the response to Sandy seems to be going about as well could be expected.

    What really needs to be looked at, though is the willingness (or lack thereof) in the US to preplan substantial infrastructure investments with a view toward dealing with situations like this. The potential for the subways to flood, for example was noted long long ago, but nothing significant was done to prevent it. Five or six billion dollars 5 years ago could have mitigated the undoubtedly tens of billions of dollars of damage we’ll be seeing to MTA over the coming weeks.Report

  2. Avatar Mike Dwyer
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    says:

    I get pretty liberal when it comes to first responders. I want to see them well-funded at every level of the government.

    With that said, my fantasy proposal would be to this:

    – Eliminate the Coast Guard’s roll in drug interdiction and coastal patrols. Give that to the Navy.

    – Make it illegal for the National Guard to be deployed internationally.

    – Roll the Coast Guard and the National Guard together under the umbrella of FEMA. Eliminate duplicity of job functions and streamline services.Report

    • Avatar Kolohe in reply to Mike Dwyer
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      says:

      – “Roll the Coast Guard and the National Guard together under the umbrella of FEMA. Eliminate duplicity of job functions and streamline services.”

      There isn’t a lot of overlap between National Guard and Coast Guard missions, either day to day or in emergencies. Rotary wing air mobility, maybe, and even then each has sub-missions they are individually specialized for and better at.

      The Navy does a quite a bit already with drug interdiction, but there are limits due to (probably good idea) legal authorities – but also that’s why the Navy works hand in hand with the coast guard on those cases. (whenever you hear ‘Joint Interagency Task Force’ that’s generally Homeland Security & other law enforcement agencies and DoD working together).

      (of course, we could get out of the business of drug interdiction altogether…)Report

    • Avatar George Turner in reply to Mike Dwyer
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      says:

      The purpose of the National Guard is to have a force trained to uniform standards that can be deployed overseas. If the National Guard is deployed then their disaster relief role falls back to the militia, as was often done in WW-II.Report

  3. Avatar Russell Saunders
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    says:

    Governmental disaster insurance schemes didn’t appear magically in a vacuum

    The same might be said about Medicare, Medicaid, Social Security, etc.Report

    • Avatar Dan Miller in reply to Russell Saunders
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      says:

      Exactly this. The human inability to properly fund disaster preparedness except when forced to by an outside agency manifests itself even when the disaster is something smaller like “lost my job and got cancer”. And the inadequacy of individual charitable giving shows up there as well.Report

  4. Avatar Brandon Berg
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    says:

    However, one of the axioms from my industry is that there is no such thing as an uninsurable risk, there are just risks people aren’t willing to pay enough premium for. This is absolutely true for natural disasters. If your insurance provider offered you or your business coverage that would protect you from disasters like Sandy, you would not be willing to pay the premium required.

    This strikes me as a strong argument for the government not getting involved. If the government weren’t there to pick up the tab, it’s likely that lenders would require private insurance to obtain a mortgage, just as they do for fire insurance. And if the cost of that insurance is so prohibitive that you decide not to build there, then that’s probably for the best, because the benefits of building there are less than the expected costs of damages.

    It’s one thing to say that the government should make sure people have what they need to survive. But how is it at all controversial to say that government shouldn’t be in the business of subsidizing beachfront property?Report

    • Avatar Patrick Bridges in reply to Brandon Berg
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      says:

      It’s controversial because it’s not just “beachfront property” on which the government subsidizes flood insurance – 100-year flood plains are all over the country, including in very poor areas. NOAA’s state of the coast (http://stateofthecoast.noaa.gov/pop100yr/welcome.html) reports that 16.5 million people live in the 100-year coastal flood plain, 12% (almost 2 million people) below the poverty level.

      More anecdotally, towns like Pass Christian, MS were wiped off the map by Katrina, and even with insurance (both home owner and NFIP flood insurance) had a hard time getting sufficient payouts to rebuild. Insurance companies disputed payouts aggressively, and State Farm pulled out of Mississippi after Katrina because if complaints about (and lawsuits threatened about) insufficient payouts. Simply put, insurance companies in those areas have to either under-cost their insurance to sell a product (and try to underpay when a disaster happens), or not sell them at all.

      Finally, some of the best farmland is around rivers that periodically flood, simply because this provides the most fertile soil along with water to irrigate when there’s a drought. Abandoning that or drastically raising the rate of insurance on that land would have a huge impact on food prices.

      It’s fine to talk about jacking up insurance rates on “beachfront property”, but any realistic discussion of changing flood or disaster insurance needs to take into account the actual population of people it impacts, how changing insurance subsidies would impact them, and if we decide to change the policies how to do so in a way that doesn’t have enormous social and economic consequences.Report

    • Avatar greginak in reply to Brandon Berg
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      says:

      You do realize that would mean not building anything near any major river or coast line or earthquake territory or tornado/hurricane prone areas. That would exclude a hell of a lot of the country not to mention every port.Report

      • Avatar Kim in reply to greginak
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        says:

        Pittsburgh advises the rest of you to live on hills. 😉 4+ inches of rain, and we’re still standing (also high winds…)
        I pity Cleveland… they didn’t even get any warning.Report

      • Avatar Brandon Berg in reply to greginak
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        says:

        I didn’t say nobody should build anything near any major river or coast. I said they shouldn’t do so when it’s not worth the extra cost of insuring.Report

        • Avatar Kim in reply to Brandon Berg
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          says:

          And what of teh economic drag on the economy from the necessary extra shipping?Report

        • Avatar Tod Kelly in reply to Brandon Berg
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          says:

          “I didn’t say nobody should build anything near any major river or coast. I said they shouldn’t do so when it’s not worth the extra cost of insuring.”

          And for a small collection of houses, this is of course a viable answer. The problem occurs when you wish an insurer to insure against catastrophic Acts Of God, such in the case of Sandy. Insurance companies cannot collect enough money to pay all the claims that will happen in such an event; this is partly because were they to ask you to purchase that premium, you would decline because of the cost. As I said in the OP, when given the option to insure against catastrophic events people and businesses don’t – whether or not there is a government safety net.

          There are other systems we could attempt.

          We could move to a system where only a very small percentage that can afford such AOG coverage can be protected, and be willing to live with large chunks of our national economy down for prolonged periods of time after a natural disaster. We could move to a system where everyone is required by law to purchase an AOG policy but is allowed to do so from a private insurer, so that the pool of risk is large enough to absorb the losses but you don’t have to deal with the government. Or, if you prefer, you can eliminate the government and just assume everyone (or at least a large enough section of the populace to make a sufficiently sized pool) will voluntarily buy very-low-frequency/very-high-severity AOG insurance – despite the fact that such a thing has never happened before with any type of insurance product – because such are the values we wish to have as a society.

          Whether or not any of those is a desirable system is a different argument.Report

          • Avatar Brandon Berg in reply to Tod Kelly
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            says:

            The main issue isn’t government or private provision of insurance—it’s the moral hazard aspect of socializing the cost of building in high-risk areas. In theory, if we had a better government, it could levy a FEMA fee, charging people the expected cost of repairs and other expenses FEMA might incur on their behalf, rather than funding it from general tax revenues. But that’s not the government we have, so it’s better to keep it out of that area altogether.

            As I said in the OP, when given the option to insure against catastrophic events people and businesses don’t – whether or not there is a government safety net.

            People buy fire insurance, don’t they?Report

            • Avatar Tod Kelly in reply to Brandon Berg
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              says:

              “People buy fire insurance, don’t they?”

              They do, because it is cheap. This is because when a claim is made an insurer has to pay a few tens or hundreds of thousands of dollars to replace the house. They do not have to pay billions to take care of the damage caused by a single event.Report

              • Avatar Brandon Berg in reply to Tod Kelly
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                says:

                This doesn’t make a lot of sense to me. There are large-scale fires that destroy thousands of homes. Does insurance not pay for those? Moreover, there are many small-scale fires that destroy one or a handful of homes. From what I’m finding, national expenditures on fire insurance are more than average annual FEMA expenditures.

                I get that damage from large-scale disasters is spikier than damage from small-scale fires, but that shouldn’t make it uninsurable. Insurers can diversify geographically to limit their losses due to any one disaster.Report

              • Avatar Pat Cahalan in reply to Brandon Berg
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                says:

                A fire taking out 100 homes typically is going to hit a few insurers.

                And it’s not billions of dollars.

                I get that damage from large-scale disasters is spikier than damage from small-scale fires, but that shouldn’t make it uninsurable. Insurers can diversify geographically to limit their losses due to any one disaster.

                This is one of those times when market theory doesn’t match what happens in reality.

                In reality, they don’t diversify enough, and typically when a very large event like a major hurricane hits, the response of the insurance industry is to underpay and then get out of that market entirely.

                Because no matter how big of a player you are, you can’t take a $20 billion dollar hit in a quarter. Nobody can hold onto that much cash and near-cash assets.Report

            • Avatar Kim in reply to Brandon Berg
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              says:

              Not after the first fire, when the premium goes through the roof.
              It’s reallyelementary, my dear.Report

            • Avatar Brandon Berg in reply to Brandon Berg
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              says:

              I should add, by the way, that the government subsidizing disaster relief in New Jersey isn’t nearly as problematic as doing so in disaster hot spots. I’m not really up on my geological and meteorological history, but I assume that the New York metropolitan area was able to grow so large and dense in part because it has historically been mostly free of major natural disasters. So it’s unlikely that socializing insurance costs has made much of a difference in terms of building patterns.Report

              • Avatar Kim in reply to Brandon Berg
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                says:

                So… you want us to evacuate Florida? All of it? It’s highest point is less than 100 feet above sea level (and that’s in the panhandle…).
                Some people are apparently willing to pay exhorbitant amounts of money to live in swampland. What effect on the economy does this have?Report

          • Avatar MikeSchilling in reply to Tod Kelly
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            says:

            be willing to live with large chunks of our national economy down for prolonged periods of time after a natural disaster.

            Well worth it to avoid the spectre of socialist moral hazard. In fact, since it will teach people to be more agile in their economic pursuits, it’s a positive good.Report

          • Avatar Stillwater in reply to Tod Kelly
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            says:

            so that the pool of risk is large enough to absorb the losses but you don’t have to deal with the government.

            That’s just socialism by another name, Tod, since the winners are still subsidizing the losers. Government mandated non-governmental socialism” is what that’s called. Yeah. That’s it.

            Catchy, no?Report

    • Avatar Kim in reply to Brandon Berg
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      says:

      nobody’s selling insurance through large portions of the gulf coast, last I heard.
      Plenty of folks stopped paying for insurance after Irene (possibly going to get in trouble with their bank).

      But what about the 70-yr-old woman who’s sitting right by the Suskie right now, her house underwater?Report

    • Avatar Kim in reply to Brandon Berg
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      says:

      Cape Hatteras is now an Island. Is it beachfront property now???Report

    • Avatar Jeff No-Last-Name in reply to Brandon Berg
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      says:

      Where ya gonna live?

      Ain’t no place safe.Report

    • Avatar Jeff No-Last-Name in reply to Brandon Berg
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      says:

      This is the “beachfront property” in Manhatten:
      See also “Con-Ed power station explosion”Report

    • Avatar trizzlor in reply to Brandon Berg
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      says:

      “But how is it at all controversial to say that government shouldn’t be in the business of subsidizing beachfront property?”

      This sounds to me like the old argument that if we didn’t have any life-guards then we wouldn’t have any drownings; i.e. people take risks because the government protects them from the consequences. Personally, I’d like to think that we live in a society that tries hard to make sure that most simple mistakes (eg. living close to the water, not purchasing health-insurance) do not result in life-altering consequences. The moral hazard that lifeguards/FEMA encourage has to be weighed against the sense of security that people feel – every single day – knowing that a freak act of God won’t turn the rest of their life upside-down.Report

      • Avatar Brandon Berg in reply to trizzlor
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        says:

        The moral hazard that lifeguards/FEMA encourage has to be weighed against the sense of security that people feel – every single day – knowing that a freak act of God won’t turn the rest of their life upside-down.

        This is what insurance is for. Insurance mitigates individual risk without socializing the actuarial costs.Report

        • Avatar trizzlor in reply to Brandon Berg
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          says:

          This is what insurance is for.

          Insurance doesn’t help me if I’m the only person in town who purchased it and now I get to live in a wasteland. Other people’s bad decisions also effect me.Report

          • Avatar Brandon Berg in reply to trizzlor
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            says:

            Then take your insurance money and move. Either the town in worth rebuilding, or it’s not. If it’s worth rebuilding, it will be rebuilt without subsidies. If it isn’t, then why are we subsidizing it?Report

            • Avatar Erik in reply to Brandon Berg
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              says:

              Well you must live in a perfect frictionless world, where such decisions, transactions, and time horizons all just slide together perfectly…

              Unfortunately, we live in a world of speculative bubbles, which make the lenders into morons who will not enforce such rules. If there’s a buck to be made in selling a mortgage to someone without this insurance, it will happen, and then the whole system breaks down.

              Unfortunately we live in a world where the situation changes slowly over time and not in some turn-based game where everyone is reminded to re-confirm there decisions on a routine basis. Take the example of an old Lady living in Brooklyn for 40 years, who has no mortgage and no such insurance and when she moved there was so real risk. But due primarily to waterfront development and the conversion of natural storm barriers, coupled with climate change (and you can feel free to ignore that part of the argument if you disagree), she now lives in a risk zone. What should she do? And is she like to do it when she’s just living her life? Is she going to sell her house last year on the chance that there might be a bigger chance of a devastating hurricane? Is she likely to pay very large premiums that she can’t afford? If she doesn’t do any of these things and gets into trouble, is society just going to let her go under?

              Libertarian economics works great in theory, but humanity is not some well-oiled machine that can be tweaked. Most of us make irrational decisions from time to time (or all the time) and when you add them up, it’s a very inefficient mechanism where “market” solutions just do not function, never mind the fact that shift to them from the current state would be virtually impossible as well.Report

            • Avatar trizzlor in reply to Brandon Berg
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              says:

              Then take your insurance money and move.

              Then I think we’re on the same page as to the outcomes: if the act of God comes and you made a mistake (didn’t know enough to get insurance, didn’t care, filled out the wrong form, forgot to file, etc.) the rest of your life is turned upside down and you’re SOL. As Tod points out, this will be the case for many people. If you did the right thing, many of your neighbors and your community will still be devastated (see above); you will have to move and your life will still be turned upside down, though maybe not forever.

              Government offers two unique solutions here: it can guarantee a buffer against other peoples mistakes and it has enough coordinated resources on hand to revitalize the area quickly even in the case of massive disasters. That’s the advantage of central planning. You may think that advantage is not the worth the moral hazard, but your argument isn’t convincing without addressing it.

              BTW, we haven’t even begun to talk about preparing for the disaster before it hits, which, without collectivism, creates all sorts of free-rider problems.Report

          • Avatar Kim in reply to trizzlor
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            says:

            And this is why it’s better to live in a community of foxes than in one of either lions or sheep.Report

        • Avatar Patrick Bridges in reply to Brandon Berg
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          says:

          Brandon, you point makes sense only if the market for insurance actually *works*. Tod’s point is that it doesn’t for act-of-god insurance. The potential loss is just too large to make work for something like a Katrina.

          If a company spreads the act-of-god pool nationally to spread risk, then people in low-risk areas subsidize the people in high-risk areas with inflated rates. That works until the expanded pool is undercut by a pool for only the lower-risk area that doesn’t do that, at which point the low-risk people all leave the pool. At that point, all the pool has in it are people in the high-risk areas at high rates that most people cannot afford.

          You might argue that at this point, the people who work there either pay the insurance (maybe because the employers pay more if they can to get qualified employees) or take their chances. And that’s exactly what happens – because people are actually really bad at accounting for low-probability catastrophic events, you end up with is a sizeable population that is uninsured or underinsured. And given their inability to get sufficient insurance, how good do you think their, for example, housing is?

          And then a disaster happens. Do we say “screw you, enjoy being homeless and starving in a disaster zone”? What’s that do to GDP, home values, crime rates, and everything else both in the area and nationally? Do we pay after the fact to help them better when they’ve paid little to nothing very little up front to be covered for the comparative risk?

          And so we subsidize insurance in these areas, asking them to pay a good share of but not all the risk they’re taking so that if something bad happens, we avoid being in an even worse situation. It’s the best thing that we’ve found that works in reality, where there are problems besides just moral hazards we have to worry about.Report

    • Avatar LWA (Lib With Attitude) in reply to Brandon Berg
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      says:

      Brandon-
      What you make is a hypothesis-
      “What if we did this, would that happen?”

      Rather than try to resolve it in a set of hypotheticals, lets ask ourselves-
      Was there ever a period in which government did not insure for disasters?
      What was the result?
      Is what existed then superior to what exists now?Report

    • Avatar Brandon Berg in reply to Brandon Berg
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      says:

      I regret my rhetorical use of the term “beachfront property.” My point was about the moral hazard inherent in socializing the costs of natural disaster, not about the value of the property in question.Report

  5. Avatar NewDealer
    Ignored
    says:

    The interesting thing I read about Sandy is speculation about how it might cause a Constitutional Crisis.

    The East Coast got hit very hard and it will take days to get everything back on-line if not weeks. What if the East Coast is not ready to vote by a week from now?

    Also I find it very odd to live in a huge country right now. Life as normal seems to be happening on the West Coast. San Francisco is preparing for a ticker-tape parade to celebrate the Giants. All my East Coast friends seem to be fine and safe but NYC is in havoc.Report

    • Avatar James Hanley in reply to NewDealer
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      says:

      What if the East Coast is not ready to vote by a week from now?

      That’s what I’ve been wondering about, too. I remember some time after 9/11 some folks started suggesting we should make a plan for a postponed election in case of another 9/11 type attack right before election day. The overwhelming response was, “No, we don’t postpone elections in America–consider the 1864 election as an object lesson.”

      On one hand, I kinda like that we take our electoral process so seriously that we don’t want to monkey around with it in that way, possibly giving some politically motivated president an excuse to call a national emergency and “temporarily” post-pone the election that might remove him from office. But on the other hand, in the real world shit happens, and we really ought to have contingency plans for at least the relatively foreseeable shit.

      If the northeast is able to get things back together in time to have a normal election day, it will be through a herculean effort. But what if this storm had hit just a few days later? The no herculean effort in the world would make it possible to get back on their feet in time.Report

      • Avatar bookdragon in reply to James Hanley
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        says:

        As I recall, there were primaries being held in NY when the towers went down. Voting was suspended and the primaries were rescheduled for the 25th.

        I think this is a place where the states should get to make the decision. A president shouldn’t be able to suspend elections, but individual states if hit by large-scale disaster that would prevent big swaths of the population from voting should be able to petition to have the date moved or other accommodations made.Report

        • Avatar James Hanley in reply to bookdragon
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          says:

          Primaries are handled by a combination of the parties and the states. The presidential election date is set by Congress in Article II, section 1.

          The Congress may determine the time of chusing the electors.

          So only Congress really has authority to do anything here, and they’re not in session now because of….the election.

          If NY or NJ or the other affected states do anything to postpone the presidential election in affected areas, Congress could presumably ratify their action post-hoc, but would a Republican dominated House do that for heavily Democratic states? Particularly if they thought more Dem leaning districts were more affected?

          And what is the potential for lawsuits if voting is delayed, or if it’s not delayed and things don’t go smoothly?

          I hope I’m just Chicken Littling.Report

          • Avatar MikeSchilling in reply to James Hanley
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            says:

            would a Republican dominated House do that for heavily Democratic states? Particularly if they thought more Dem leaning districts were more affected?

            Yes, their sense of patriotism would lead them to do the right

            (Sorry, I can’t type when I’m laughing that hard.)Report

          • Avatar Kim in reply to James Hanley
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            says:

            This seems like the sort of thing the President ought to handle — with an implied “If Congress thinks I’m wrong, Go Vote On It.”
            The government should never be in recess, but “quick decisions” need not be left to the legislature…Report

          • Avatar DavidTC in reply to James Hanley
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            says:

            They are the _state’s_ electors. If the _state_ needs an extra week or so to get them together, the state can take an extra week. As long as the certified vote is mailed to the right people and state what the numbers are, it’s a damn valid election. (Incidentally, I dislike this fact generally, I think the Federal government should be running elections for Federal offices…but that fact is true whether or not I like it at any given moment.)

            And the constitution does not actually say what could happen, so I’m confused as to what people think _would_ happen if a state picked a different day. Congress has no authority that I can see to reject cast votes. In fact, trying to do _that_ would cause a constitutional crisis:

            ‘…which lists [the electors] shall sign and certify, and transmit sealed to the seat of the government of the United States, directed to the President of the Senate; the President of the Senate shall, in the presence of the Senate and House of Representatives, open all the certificates and the votes shall then be counted…’

            Nothing in there about ‘Unless they voted on the wrong date’. If it is signed and certified by proper state authorities and gotten to Congress in time, Congress _shall_ count it, period.

            Now, I guess the Federal government could make voting on a different day a crime, or make electors casting electoral votes from the result of a wrong-date vote a crime…but they haven’t done that, and they can’t do it retroactively. And it wouldn’t affect the election anyway. (Much like state laws against faithless electors…an argument can be made that states can, indeed, make that a crime…but it won’t change the actual vote they actually cast.)

            That said, the easiest solution would be for Congress to hurry back to DC and postpone the entire election by a week.Report

    • Avatar Kim in reply to NewDealer
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      says:

      NYC is in havoc because there’s too many newspeople there.
      Some places in Jersey are … just… gone.
      Those are the people I’m currently MOST worried about.Report

  6. Avatar Gene O'Grady
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    says:

    I don’t understand the use of populism in this essay — surely the author means localism, the guiding philosophy of much of the US before the reforms of the latter part of the 19th century, especially Civil Service Reform. Which reforms it happens to be a goal of the Romney/Ryan campaign to reverse.Report

  7. Avatar Jeff No-Last-Name
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    says:

    I could say something about the conservative response to tragedy, as espoused here by Brandon. But I’ll play nice and not do more than point out the obvious.Report

  8. Avatar Mike Dwyer
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    says:

    Dumb question here: When these homes are destroyed, do the owners typically rebuild them in a more hurricane-resistant style? I am always amazed how much wood I see on the coast. If I lived in those areas I would go with an elevated house in a very contemporary, all-concrete style.Report

    • Avatar Will H. in reply to Mike Dwyer
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      says:

      It depends on the local government.
      Florida has the “red zone” 6 miles inland which require certain things.
      That was a response to Andrew.

      I remember seeing the carpenters in Galveston using the same type of bracing, but I don’t believe it is a formal requirement there, but a “best practices” sort of thing, kind of like wrapping a receptacle with vinyl tape prior to installation.Report

    • Avatar James Hanley in reply to Mike Dwyer
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      says:

      Mike,

      I’m no expert, but my vague understanding is that the improvements are usually marginal. Insurance/government compensation is usually for the value of the house, meaning homeowners often don’t have the funds to do a substantial upgrade for real hurricane resistance. But some things can be done relatively inexpensively, and since some of these homes were built many states/municipalities have enhanced the standards so that when rebuilding they have to meet the new requirements. E.g., it used to be common in Florida for homes to not be bolted to the foundation. In a normal condition of high wind this isn’t a problem because the mass of the house is sufficient to hold itself down firmly, but in hurricane force winds the structure can literally be blow off the foundation, at which point the structure fails. So just keeping the thing on the foundation can minimize the damage in many–perhaps most–cases, by limiting it to more readily reparable problems like tree limbs punching holes in the walls. And I think a lot of those localities/states have made bolting the frame to the foundation part of their building codes.

      Hopefully someone with more detailed knowledge can chime in.Report

      • Avatar Will H. in reply to James Hanley
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        says:

        That’s fairly astute, but it leaves out the water part of the equation.
        Think of an airhose at 500 psi. The air is perfectly safe to stick your hand in front of it.
        However, if any tiny little droplet of water is present, it will rip the meat right off of your hand.
        Hurricane is the same way.
        You can see it with the trees.
        Pines typically lose branches, which snap right off. An oak will bowl right over after awhile when the ground is really wet, roots and all, leaving a big crater in the ground.
        House is the same way.
        As long as the wind is outside, it’s ok.
        If the wind comes inside for any reason, kiss your ass goodbye.Report

      • Avatar Kim in reply to James Hanley
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        says:

        insured for the value of the house often means that the house you rebuild there is worse off than the original house.
        Insurance that will replace your house — as originally built, is a touch more expensive. But it means if your house is destroyed, you actually gain value.Report

    • Avatar Morat20 in reply to Mike Dwyer
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      says:

      In general, not unless building codes have changed. Insurance doesn’t pay for improvements, but repairs have to meet current building codes.Report

  9. Avatar Patrick Bridges
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    says:

    Thinking about it some more, another issue with market-based solutions to disaster management is the frequency with which feedback occurs – because true act-of-god disasters are comparatively rare, the rate at which insurance companies and individuals get feedback about their behaviors is really slow, and so it would take a long time for any particular market-based solution to stabilize, if ever. If there’s not consistent feedback on both the risk and rewards of a market choice, it can take a long time for it to stabilize. If that feedback happens less frequently or with much higher variance than changes in the underlying market, the market could essentially *always* be wrong, right?Report

  10. Avatar Damon
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    says:

    I’d have a lot more support for gov’t disaster plans if they simply removed the subsidized flood insurance. I don’t care whether you’re rich or poor. I’ll give you one disaster, then I’m done. If you chose to continue living in an area prone to consistant flooding, then I see no reason why I should have to pay to continually rebuild your house. Move or the next one’s on you.Report

    • Avatar Kim in reply to Damon
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      says:

      So get rid of new orleans? NYC? San Francisco? LA?

      I’mc onvinced folks like you aren’t really thinking about most of the problems.Report

      • Avatar Patrick Bridges in reply to Kim
        Ignored
        says:

        I’m going to push back a bit here because I think it’s important that we take the idea of market-based solutions to these problems seriously. It’s important to understand why and when they do and don’t work.

        So, I’m going to play devil’s advocate for a bit.

        People settled in coastal areas and in flood plains around rivers because they were inherently more valuable – they provide easier access to long distance and heavy transportation, are very fertile and resource-rich, are popular tourist destinations for the beautiful beaches, etc. Basically, the added value of living in these areas outweighed the higher risk they carried due to natural disaster, and people who lived in these area in many cases were paid proportionately more compared to people who lived away from these areas, etc. In addition, more infrastructure has also been built in these areas over time which also makes them more valuable.

        The relative values of these areas have now changed, however. The proliferation of easy mechanical heavy transport via trains and roads, modern agriculture, and the move to a more information-based economy means that these areas are comparatively less valuable than they used to be. We still need ports and farms and such, but we need fewer people to run them. We should *want* people that don’t need to live in these areas to gradually move away from them.

        You could argue that subsidizing risk in these areas slows or prevents this from happening, and we need this to happen. Now, I think, and I think Tod argues persuasively, that there are good reasons we should be subsidizing this risk, but don’t want to be too quick to discard some of the more subtle points underlying these arguments, either.Report

    • Avatar Jeff No-Last-Name in reply to Damon
      Ignored
      says:

      You obviously didn’t see <a href="http://www.crisishq.com/wp-content/uploads/2012/02/z_us_disaster_map1.jpg"the map above (which does not include blizzards). Where are your hypothetical people go to move TO?

      I tell ya, Somalia’s too good for some folks…Report

      • Avatar Damon in reply to Jeff No-Last-Name
        Ignored
        says:

        I’m really not talking about catastrophic disasters like Katrina, although that ‘cane is one of the best examples of how incompetent federal disaster help can be, or massive earthquakes, etc. I’m talking about areas of the country the flood regularly. I’m talking about houses built on barrier islands and sand dunes. I’m talking bout living in a documented river flood plain below the 100 year mark.Report

  11. Avatar North
    Ignored
    says:

    This a a great article my Tod and congrats; you scored a mention on the Dish.Report

  12. Avatar Jeff No-Last-Name
    Ignored
    says:

    Since Brandon thinks all I have is “cheap innuendo”, I’ll come out and say it. So far, the conservative response to tragedy is “Move!” They don’t tell you where it’s safe to move to, or who’s going to pay for the relocation — it’s all “free market above all”, no matter who suffers.

    We’ve seen two major storms in the past few years — one was “handled” by laissez-faire government; and one by pro-active government. Would you really have rather lived through Katrina or Sandy? Or would not even want the pitiful response that came from the Bush Administration?Report

  13. Avatar Jeff No-Last-Name
    Ignored
    says:

    One more comment: Obama was praised by Christie (who had no reason to say anything nice about the President); Romney pissed off the Red Cross for a photo-op, then repeated a lie about Jeep (pissing off the CEOs of Chrysler **AND** GM).

    Who has better management skills?Report

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