Moral Hazards and Natural Disasters | The American Spectator | USA News and Politics
Moral Hazards and Natural Disasters
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In the wake of Hurricane Katrina, Dennis Hastert came under fire for comments he made suggesting that it made no sense to rebuild New Orleans and that "it looks like a lot of that place could be bulldozed." Today, the Washington Post reports:

NEW ORLEANS — By ones and twos, homeowners here are reinhabiting neighborhoods, even the most devastated ones, and many view their return as a triumph over adversity.

But experts involved in the rebuilding believe that the helter-skelter return of residents to this low-lying metropolis may represent another potential disaster.

After Katrina, teams of planners recommended that broad swaths of vulnerable neighborhoods be abandoned. Yet all areas of the city have at least some residents beginning to rebuild. With billions of dollars in federal relief for homeowners trickling in, more people are expected to follow.

Because those who lost their homes during Hurricane Katrina do not have to bear the full cost of rebuilding, there isn't a disincentive to moving back to the same neighborhoods that were hardest hit. It may seem compassionate to throw federal money at Katrina victims to help them rebuild, but it's doing New Orleans residents no service to allow them to use the money to repopulate areas that would be at great risk if another major hurricane struck.  

   

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