Keynesian Katrina
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It blows my mind that anyone can look at photos of the devastatioon in New Orleans, and say to themselves that the hurricane's destruction is good for the economy. But, alas, they do.
It's called the Broken Window Fallacy and it's one of the most common mistakes in popular economics, a legacy of John Maynard Keynes.
Where does that recovery money come from? Your tax dollars (eventually), your higher insurance premiums (eventually) and money that would have been spent productively instead of replacing losses.
A former NOLA resident is sitting next to me. According to him, you can't buy Flood insurance for your house in NO...well, I guess you could but the price would be something like 1000x what you would pay in another state. Insurnace companies price themselves out of the market so they don't have that burden*.
So, if this is true about flood insurance (and I've no reason to doubt it) then insurance premiums won't be *as bad* as they might otherwise be (think: local insurance companies going bankrupt).
* Similar to the motorcycle insurance I was quoted in Texas once ($2000 a month, instead of the $550 a year I was paying in California for the exact same insurance from the same company).
Posted by: Bubba on August 31, 2005 1:03 PM | permalink1st point-
So if no one had flood insurance, does that mean they can't recoup their losses? That's it? All their possesions ruined with no compensation?
How does that all work? Is there some kind of "natural disaster" clause in their insurance contract?
2nd point-
I'm suprised that the city hasn't flooded this badly before now. It was only a matter of time. You're asking for trouble building your city below sea level with levees and water pumps as your only safeguards. Who in their right mind is going to want to rebuild and live there now?
Mahatt:
1) If Bubba's correct, I would imagine that insurers put in a clause to that effect. I believe you can apply for federal assistance or somesuch. I know lots of insurance policies explicitly state that they don't cover wars.
2) I think most of the Netherlands is built below sea level. Then again, it isn't in a place succeptible to hurricanes.
Posted by: Joe Grossberg on August 31, 2005 2:38 PM | permalinkUsed to be, the Mississippi deposited lots of silt throughout the delta, creating shifting land masses South of New Orleans. Then in the interest of commerce, the course of the Mississippi was straightened and the river bottom dredged, and so for some time now, there hasn't been much in the way of silt to collect. And so those shifting land masses have eventually worn away.
It was the sand bars and shallows of the delta that in the past protected New Orleans from the worst of the hurricanes -- the storms always weaken over land, after all. But now they're gone, and so New Orleans has been becoming increasingly vulnerable, to the point where it was indeed only a matter of time before a disaster like this struck.
Another issue was that the engineers who constructed the levees were instructed to account for a fast-moving category 3 hurricane, not a slow moving 4 like Katrina. I'm sure they won't make that mistake again.
And look at it this way -- it was a secondary levee on a canal leading from Lake Ponchartrain that was breached. Had the levees along the Mississippi -- whose surface is actually HIGHER than that of the lake -- been breached, the disaster would have been infinitely worse.
Since I usually just read you on my LJ friends list, I'm just seeing these comments about flood insurance here. They're very inaccurate. Flood insurance *is* generally available in NO, and more people possess policies there than almost any other part of the country. It is expensive there, but it has nothing to do with insurance companies, as flood insurance rates are set by the federal government. As for "pricing out" -- the rates are based on risks, which clearly are high in NO, and in fact many high-risk flood insurance policies are subsidized, or else they'd be even more expensive if they were full rates.
Can you tell I work with this stuff? :)
Now if you were talking about HURRICANE insurance, that may be a different situation, as I'm not exactly sure how that operates... but flood insurance is still highly relevant here, since this damage is flood damage.
Posted by: Jay S on August 31, 2005 6:04 PM | permalink"""I think most of the Netherlands is built below sea level. Then again, it isn't in a place succeptible to hurricanes."""
Yes, much of it is below sea level. Floods do occur, but the last major one was in 1953. Since then, we have this thing: [http://en.wikipedia.org/wiki/Delta_Works]
Posted by: Hans on August 31, 2005 6:44 PM | permalinkWow, what an interesting assortment of comments. Maybe I should go back to commenting on current events more often.
Posted by: Joe Grossberg on August 31, 2005 10:24 PM | permalinkThanks for the comment Jay. I hadn't made the distinction myself between Flood and Hurricane.
Maybe that's the difference in what David (my office mate) is saying.
Posted by: Bubba on September 1, 2005 1:52 PM | permalinkNo more comments! Either someone has violated Godwin's Law, I'm tired of the discussion or, most likely, the ten-week window has closed. You can, however, contact me through email.