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OK but let's pretend that volcano has a really nice view of the ocean, and a super stable climate all year round! All of a sudden that one crazy guy building a

OK but let's pretend that volcano has a really nice view of the ocean, and a super stable climate all year round! All of a sudden that one crazy guy building a home there becomes thousands, they become millions. Now let's give this volcano a name, something random like "California". At what point can the "if someone wants to build on California, just let them" be squared away against the inevitable humanitarian disaster of thousands of displaced families in our hypothetical location? At what point does the government step in and say: we'll the first guy was dumb, but we let him do it, then other followed and now we have thousands and thousands and can't ignore it anymore.

dodobirdlord 6y ago
Well, step 1 in any scenario where the government is essentially forced to bail out a group if something goes wrong is to force the members of the group to pay for appropriate insurance. Alignment of incentives is essential. People who live in wildfire prone areas should be required to hold adequate fire-related disaster insurance that the government will, on not, not spend money subsidizing their poor decision making. This may make it financially unviable for many of those people to remain in those places, which is good and an intended effect. An interesting related example is Federal Deposit Insurance. The Great Depression made clear to the Federal government that deposits had to be insured against bank failure or nobody would ever trust banks to hold savings again and the banking system would never recover. So it introduced a mandatory insurance system that all banks would pay into to insure the deposits of any bank that failed.
- teruakohatu 6y ago
  Here in New Zealand homes are not required to be insured, but all home insurance plans are required to pass on a levy to the government, which will cover the first $150,000 worth of earthquake damage. Insurers are only liable for an amount more than that, which the average home is unlikely to exceed given our building standards. If your home is not insured (with a private insurer) the government says they will not help you financially after an earthquake. California could do the same, but I suspect there would be protests from people living in low fire zones, while here in NZ pretty much everywhere is at risk of earthquakes.

dodobirdlord 6y ago

Well, step 1 in any scenario where the government is essentially forced to bail out a group if something goes wrong is to force the members of the group to pay for appropriate insurance. Alignment of incentives is essential. People who live in wildfire prone areas should be required to hold adequate fire-related disaster insurance that the government will, on not, not spend money subsidizing their poor decision making. This may make it financially unviable for many of those people to remain in those places, which is good and an intended effect. An interesting related example is Federal Deposit Insurance. The Great Depression made clear to the Federal government that deposits had to be insured against bank failure or nobody would ever trust banks to hold savings again and the banking system would never recover. So it introduced a mandatory insurance system that all banks would pay into to insure the deposits of any bank that failed.

teruakohatu 6y ago
Here in New Zealand homes are not required to be insured, but all home insurance plans are required to pass on a levy to the government, which will cover the first $150,000 worth of earthquake damage. Insurers are only liable for an amount more than that, which the average home is unlikely to exceed given our building standards. If your home is not insured (with a private insurer) the government says they will not help you financially after an earthquake. California could do the same, but I suspect there would be protests from people living in low fire zones, while here in NZ pretty much everywhere is at risk of earthquakes.