"First they ignore you, then they ridicule you, then they fight you, then you win." -- Mahatma Gandhi

Flood Relief Establishes Perverse Incentives

July 30th, 2008 by mopns · No Comments

By Matt Simpson

I saw my fair share of floods while growing up. During the flood of 1993, I watched the Meramec River slowly creep toward my house and into my basement. A few years earlier, my family and I had to evacuate our home near George Winter Park because of excessive flooding. The severe damage that floods can cause makes living in the flood plain risky. When flood damage occurs, state and federal governments typically subsidize reconstruction through government grants and loans offered at subsidized rates, a practice that unintentionally sets the stage for worse devastation later on.

Government aid to flooded areas isn’t necessarily bad. Sending in the National Guard to help people evacuate, for example, fulfills an essential role of the government: protecting the public from real, physical harm. Subsidizing the cleanup and reconstruction, on the other hand, has nefarious long-term consequences.

The intention to help people is never misguided. However, the means used to help people may be ill-advised. So, it’s worth asking: Will this sort of flood relief actually relieve the pain that floods cause? In the short term, the answer is simple and obvious: yes. We can all see a farmer rebuilding his barn. Even more concretely, we’ve seen Chesterfield sprout back up after the 1993 disaster. This isn’t the entire story, though. What isn’t as obvious is that subsidizing reconstruction actually causes more flood damage over time, undermining the intended goal of relief. Read more…

Matt Simpson is an intern with the Show-Me Institute

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