After The Flood

            Our class discussion has addressed the provision of public goods at some length, but the aftermath of hurricane Sandy hi-lighted many of the fundamental questions associated with communal goods and services. In an efficient world with no asymmetric information public goods would be funded proportionally to the benefit enjoyed by the individual citizens. Unfortunately, such efficiencies are rarely realized in everyday life. Flood insurance and protective infrastructure are two public goods that serve a select number of citizens but are funded communally. The federal government is incentivizing the construction of properties located in vulnerable areas by offering insurance against flood damage.

            Ironically,even though levees and flood-ways are funded communally no national standard exists to ensure the quality of our protective infrastructure. There exists "no federal money for routine maintenance. And from a flood manager's perspective, fixing a broken levee is not always the way to go." As a society it is in our interest to restructure the incentive structure associated with flood insurance. One FEMA official recommends relocating individuals from high risk areas, "[g]et appraisals for their homes, write them a check, knock the homes down, and just let it go back to its natural state. . . I think that's something we really need to take a look at. Because governments have allowed people to build right onto the water, and water has a tendency to move." In the absence of a value-based-payment-system it is in the interest of society as a whole to minimize future losses and bite the bullet ahead of time.