** Mississippi floods, was: Does this require audio?
Topics: Safety, Resources, Programs
22 Jan 1995
From: "DG Ervan Darnell"
Stephen Patterson wrote:
> BUT, then, in the case of the
> Mississippi floods, because they couln't buy flood insurance (or din't
> want to) they have now lost everything they had, and have no way to
> recover. It's the same problem I addressed with you privately, Ervan,
> that many individuals doi not act rationally, and the moral climate of
> our society will not let us let them simply perish
Are people perfectly rational? No, of course not. Can government
policy force people to act perfectly rationally? No, of course not.
Utopia is not an option. The question is: 'which does better?', not
'which is perfect?'. Preventing people from visiting catastrophe upon
themselves only to have the government do it for them is not progress.
In the case of the flooding, you overstated the case, people did
not lose everything. They kept their savings, their jobs, their
families, and, to a large degree, their personal possessions. They only
lost their houses. They did not go hungry because of the floods nor were
they without places to live. Many moved in with relatives, and thanks
to the lack of effective zoning in most of the Mississippi 'bottom'
(as the locals call the flood plain) there was plenty of extra rental
property available.
The feds did not feed or shelter anyone (in any meaningful sense). What
they did was to eventually write checks for wrecked homes. So, "let them
simply perish" is not an issue here. The moral climate of the country
does not make the case one way or another. With that out of they way,
I'll return to the matter of trying to protect people from themselves.
Returning to the question of whether federal policy actually protects
people from themselves in any useful way, my first observation is that
federal flood insurance is underpriced. When they let you buy it directly
(which is required in the bottom for most new construction), you pay
too little for it. Thus, the feds have paid people to live recklessly.
Second, numerous bailouts for everything from building on top of the
San Andreas to building 3 story wood shacks on Florida's East coast
have sent the message that your mistakes will also be subsidized.
So, in the first place, it is irrational government policy and not
irrational individuals that created the losses.
Presumably, that is being 'fixed' now by prohibiting building. This
might be better for taxpayers than the continued subsidy of folly but
it is clearly worse for the country at large than the feds getting out
of the flood insurance 'business' completely (because of lost
utilization; I'm assuming you are not trying to argue that farming
the bottom is irrational, only that living there is. Though, the
government is trying to make it illegal to farm there too).
But that's not your real point, which was: protecting foolish people from
moving back in and getting flooded out in the future. Levees protecting
areas with a significant number of homes break every 20-30 years (the
one I know best, that a few hundred people live behind, had not broken
since it was built over 60 years ago). Most of the building in the
area (that I am familiar with, other data may be applicable here) was
either commercial (presumably at their own risk, even in this argument)
or trailer homes.
That People bring in trailer homes shows they understand that it is a
flood plain and that they should not invest too much. What is the
average life of a trailer? A lot less than 50 years. Thus the net
investment loss is not large over the risk already being taken. That
people took such risks is not obviously irrational at all. The new
government policy is that they must now live where land is more
expensive and/or where they do not like the environment as much (the
bodies of water in the bottom are an attraction to some people). That
sounds irrational to me.
The people who owned plots or rental real estate in the bottom have
suffered real damage by the new policy because they can no longer use
their land in the most efficient way. River damage was only a few
month's rent in contrast. In some cases, the former is a hefty
loss. The government has no intention of subsidizing people for the
value it destroys (how ironic, it pays for the river's treachery but
not its own). As for permanent homes there were two types: farm houses
and vacation homes. The farm houses were located there to be close
to the fields that had to be worked. The new policy is that people
must drive long distances (being close to your house is a lot more
important for farming than office work too). Seems to me like the
farmers were rational and the government irrational (I want all
congressmen who voted for this b.s. to work a farm for one month
from 10 miles away [okay, actually I want them to drown in large
piles of pig manure, but that's a different matter]).
The vacation homes part really galls me. These houses (cabins really)
were cheap affairs built on stilts "over the levee" (i.e. on the small
spit of land between the levee and the river's normal bank). Nobody
lived there year round. They were just for vacation. That they were
cheap, not used year round, and not well furnished, again, clearly
indicates the owners perfectly well knew the risk and decided to take
it. Furthermore, since these are second homes, we are not talking
about the truly poor anymore. But never mind, the new federal plan
makes it flatly illegal to rebuild anything in that location (that it
is private property is just a DOA concept in Washington apparently).
Even the poor who move into houses in such places are not necessarily
being irrational. Even though they are risking it all, they are saving
money, badly needed money for food or the kids education or whatever.
If such things are irrational do we outlaw trailers entirely because
of tornado risk? That would really screw a lot of poor people by
pricing them out of the housing market. That's worse than letting
them take their chances with tornados. Or, in the city, do we make
it illegal for poor people to live in dangerous neighborhoods because
they might get shot? No, of course not, not even the goofs in
Washington want to do that. The health risk is not worth the cost
of moving to a better neighborhood (not necessarily a good one, but
even a 10% better one at the cost of giving up the TV or fancy car,
things clearly within discretionary power). So it is with living
in the bottom, even for poor people who risk most of their capital;
it is not obviously irrational. Not letting people live there who
can afford the risk or the insurance is clearly irrational.
So, in most cases (rich, insured, farmers, vacationers, commercial)
private individuals are more rational than the government. I think
this preponderance of cases makes my argument alone. In the remaining
cases, it is not obvious either way. If this remaining fraction is
really the problem, there is an easy answer: require anyone making
<$15K year to buy private flood insurance and chuck the rest of the
regulation. If people cannot afford the insurance they will simply
live where they must live now anyway under the new regulation.
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