Good Sunday reading & an interesting question: If New Jersey had to pay for its own rebuilding – and not rely on the federal government – would we rebuild at the shore again like it was? – Rosi
In a video that's making the rounds (after the break) and in a blog post in the Harvard Business review, UC Berkley Professor Mathew Kahn raises a provocative notion — the very existence of FEMA is squelching our ability to adapt to climate change.
Over the past several days, we've seen our governor make repeated statements that we're going to rebuild all the coastal communities along the Jersey shore that were hardest hit. But he's starting to hear it from the libertarian voices that he's got it all wrong. Peter Coy, writing in Bloomberg Businesweek, says:
Christie has gained a national reputation for fiscal discipline that’s led to talk that he could be the Republican nominee in the 2016 presidential election. But if Christie pushes too hard for federal reconstruction funds, he risks losing his reputation for stand-up frugality.
For years, environmentalists have been warning of the dangers of over-development along the coastal zone. Urban planners (like myself) have been calling for stricter development controls for a generation. What's interesting to me is that when liberals and libertarians agree on something, there's a good shot that we might actually get something done.
Video & more – after the jump
Kahn's argument boils down to the notion that people make better decisions when they see the full price of different choices. If the State of New Jersey had to bear the full cost of rebuilding after a storm — and there wasn't a FEMA to help pay for it — then we wouldn't keep building (and rebuilding) in places where it doesn't make sense. But since there's someone else paying the bill, we keep making bad choices:
From a strictly economics point of view, there's some problems with what Kahn is saying. First is that when we share risk across a larger pool, all of us are better off. So if this year we're spending money on the Jersey coast, next year it might be for flooding along the Red River in Fargo or to fight fires in Colorado. Its why insurance works.
The second problem I have with Kahn is that it assumes that rational economic actors are making decisions with perfect and complete information. And when it comes to the impacts of natural hazards — or with any events that don't happen too often — this breaks down.
Now, all that said, if this is what it takes for conservatives to start taking climate change seriously, that's all right with me. There are places along the barrier islands that we really shouldn't rebuild. Or at the very least we shouldn't build houses, but restore the beaches only for recreational uses — kind of like what Robert Moses did nearly a century ago in creating Jones Beach State Park. This is a conversation that needs to happen, because we all know that this won't be the last time we're facing this kind of extreme weather event.