US Government Causes Sandy Devastation

Ok, that’s a stretch.  Give me a chance though…

It’s 1995 and you decide to build a house.  There is a nice piece of land on the Jersey Shore.  You get a set of plans and go to the bank.  The bank says they are happy to loan you the money, but, you will need to buy insurance.

You go to your insurance agent who says he is glad to insure your new house for everything but flood.

Flood insurance is only sold by the US Government, you are told.  You buy home insurance from your agent and flood insurance from the National Flood Insurance Program.

What if flood insurance had not been available?

What if the federal government had never gotten into the flood insurance business?

Would the banker have loaned you the money, knowing that his collateral could be wiped out without insurance?

Most would not.

Maybe you wouldn’t have build the house on the Jersey Shore?

Obviously the government did not cause Sandy.  Maybe the devastation would have been less had the government not messed with incentives and the marketplace and thereby made it possible to build in flood areas.  Maybe the homes that were destroyed would have been built on stilts or using different materials and construction methods.

Who knows.  I’m not sure the above is at all helpful.  It certainly is little comfort to those who have been horribly impacted by this storm.

I’m a free-market guy.  I don’t think it is the role of government to provide flood insurance.  I think that people do best when they figure out what is in their best interest and act accordingly.  The NFIP artificially changes the marketplace.  That may serve the interests of a few – it does not serve us all.