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It's a case of moral hazard. If we bail out those who built in areas which they knew at the time might eventually be submerged, it has the negative effect of le

It's a case of moral hazard. If we bail out those who built in areas which they knew at the time might eventually be submerged, it has the negative effect of leading to inefficiently high amounts of threatened homes being constructed in the future. Same with bailing out areas that get wrecked by earthquakes or forest fires or any other natural disaster. Our natural inclination is to support people this happens to, and there is a positive in that we achieve a wealth transfer to people that just had a big hit in their well being, but if it becomes policy then going forward resources will be inefficiently allocated. The somewhat depressing thing is we probably find ourselves bailing out people who (whether they knew it or not) were only engaged in the risky behavior that lead to them needing to be bailed out because of the social norm of the government bailing out people in that type of situation.

cromwellian 10y ago
But where do you draw the line on risk? Pretty much everywhere you live has some form of risk. If it's not earthquakes, or flooding, it's tornadoes, or drought, or hurricanes, etc. Part of the point of having civilization is as a kind of insurance. If you live in a once-in-every-two-hundred-years-massive-flood-plain, are you saying living there is risky and the government should not have emergency disaster relief? Most of the coastal cities in the US including Manhattan, could be under water from global warming in the future. Are we saying that people who move to New York city should be aware of increased potential for damage from global warming? And if they should be aware of these things, perhaps we should stop ignoring global warming in our political system. It'll be cheaper to mitigate it earlier, than way 50 years for flooding to massively increase.
- jaredklewis 10y ago
  I think the solution is that people and cities buy insurance. Disaster insurance for a place that only floods once every fifty years will be much cheaper than for places that get yearly hurricanes or earthquakes, for example. It makes sense that the cost of living in dangerous places be built into the cost of living there, instead of being actually encouraged with free government money.
  - sjg007 10y ago
    No insurance company will offer it because it is too risky. Also you would need a mandate for everyone to buy it. It'll be a FEMA thing if anything and yes I would guess that Congress will authorize bailouts especially for wealthy landowners who donate to their campaigns.

cromwellian 10y ago

But where do you draw the line on risk? Pretty much everywhere you live has some form of risk. If it's not earthquakes, or flooding, it's tornadoes, or drought, or hurricanes, etc. Part of the point of having civilization is as a kind of insurance. If you live in a once-in-every-two-hundred-years-massive-flood-plain, are you saying living there is risky and the government should not have emergency disaster relief? Most of the coastal cities in the US including Manhattan, could be under water from global warming in the future. Are we saying that people who move to New York city should be aware of increased potential for damage from global warming? And if they should be aware of these things, perhaps we should stop ignoring global warming in our political system. It'll be cheaper to mitigate it earlier, than way 50 years for flooding to massively increase.

jaredklewis 10y ago
I think the solution is that people and cities buy insurance. Disaster insurance for a place that only floods once every fifty years will be much cheaper than for places that get yearly hurricanes or earthquakes, for example. It makes sense that the cost of living in dangerous places be built into the cost of living there, instead of being actually encouraged with free government money.
- sjg007 10y ago
  No insurance company will offer it because it is too risky. Also you would need a mandate for everyone to buy it. It'll be a FEMA thing if anything and yes I would guess that Congress will authorize bailouts especially for wealthy landowners who donate to their campaigns.