Thursday, February 02, 2006

Article on New Orleans Reconstruction

I have an article published in the new issue (pdf) of my college's political journal, The Undecided.


Blogger McAfee said...

The name of the journal clearly must refer to the readers it hopes to attract, not its contributors.

The flood insurance subsidy is popularly overstated. Until Katrina, the program mostly broke even on average; you can't get program insurance at any price on the Outer Banks or other officially fragile coastal environments; three-quarters of insured residences receive no deliberate subsidy; and some fraction of the remaining quarter are on high enough ground that fully priced premiums would not be more expensive than their subsidized rates. For those that are left, the subsidy can be spectacular, but some fraction of them--John Stossel, almost surely among them--will not be satisfied with a beach house worth only $350,000, and that should dilute the incentive: they can't rebuild and rebuild without putting their own money at risk or paying full price for supplementary coverage.

For reasons you say, it is an opportune time to let the market price flood insurance along the Gulf of Mexico, but for reasons I say--the financial impact and number of affected voters will be smaller than most editorial pages and congressmen imagine--it may be possible to get the government out of rate-setting nationwide.

Flood insurance subsidies were supposed to provide an inducement for communities to adopt better building codes and improve flood-plain management. (Has it worked? When I was in Mississippi week before last, the newspapers were covering a debate in the legislature about several counties that still have no building codes and don't want any.) If that is a real policy concern and not a pretext, the government could spend the $1 billion dollars it would save each year from terminating deliberate insurance subsidies directly on the problem. But it is likely to find that a billion dollars won't buy much civic improvement these days.

February 20, 2006 9:53 AM  

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