The Economics Of Disaster
|Targeted News Service|
Hurricane Sandy was one of the worst natural disasters the east coast has ever seen. Clean-up and recovery will take months, if not years and estimates run in the tens of billions of dollars. Parts of
Shouldn't that tell us that it is a losing proposition to insure homes in coastal areas and flood plains often threatened by severe and destructive weather patterns? And if it's a losing proposition, should taxpayers subsidize the inevitable losses arising from federal flood insurance?
The NFIP disguises the real cost of flood insurance in flood prone areas, which influences homebuilding and sales in such areas. Recklessly taking unwise risks when risk is underpriced is known as moral hazard. When politicians decide that private insurance premiums are too high, as with houses built in flood plains, the solution is to under price the risk through federal subsidies. The obvious and expected outcome is more danger to life and limb when disaster strikes.
Even NFIP has been forced to raise rates significantly in coastal areas, and is now dropping second homes from coverage altogether,
Many assume it is compassionate to entrust government central planners with disaster recovery. However, the greatest compassion brings results, not just good intentions. And we've seen how bureaucratic organizations like
Above all, my thoughts and prayers are with the victims of Hurricane Sandy in this tremendously difficult time and hope they can get their lives put back together as quickly and seamlessly as possible.
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