The Los Angeles Times is concerned that — gasp — individuals have to decide whether to return to New Orleans:

Lost amid continued talk of billions in federal aid is the fact that most homeowners and businesses are being left to make the toughest calls on their own. Lost is that New Orleans’ recovery — which President Bush once suggested would be one of the largest public reconstruction efforts the world had ever seen — is quickly becoming a private market affair.

This long piece is the latest in a thread of stories highlighting the “shift of economic risk from business and government to working families (note the use of “working families” instead of “individuals.” - ed.), and an increasing reliance on free markets to manage society’s problems.”

That’s what happens when you have elections and the winners, for all but eight of the last twenty-five years, are administrations that favor the individual.

The Times argues that recovery from Katrina is problematic for three reasons:

• no commitment to rebuild levees to survive a Category 3 storm, and then improve them to hold back a Category 5.

• problems with flood insurance past (homeowners mistakenly thought they were covered, and may not have insurance proceeds to rebuild) …

• … and future (depending on neighborhood, houses may have to be elevated in stilts to be insurable)

All of these are couched as indicting the “free market recovery.” But these issues really have little to do with “free markets” per se.

The real issue is that those three factors are causing NO ex-pats to sit on the sidelines and see who will be first to return. Reporter Peter Gosselin quotes economist (and Nobel laurate) Thomas Schelling as saying that “If we all expect each other to come back, we will. If we don’t, we won’t. … achieving this coordination in the circumstances of New Orleans seems impossible.” The core issue, according to the Times, is concern over whether enough people will return to provide critical mass in neighborhoods — to run stores and provide services.

The Times implies that if the “free market recovery” can’t make them come home, government should step in. But why?

Let’s say the levees are rebuilt to survive a Category 3 storm — the standard in place before Katrina. If residents still won’t return, why try to change their mind?

For many residents, life anywhere else probably has more upside than than the status quo in the Crescent City. Even the Times piece admits “much of New Orleans’ economy had been stagnating for a generation before Katrina (more like two - ed.)” and quotes the president of the Port of New Orleans as saying that it “doesn’t need the city.” Better for people to head to Atlanta or Houston than return to what is nothing more than a fetid Atlantic City.

Should we all bear the burden of the extra risk that individuals aren’t willing to assume? Say, of another Category 5 storm overrunning the city, or of building in high risk areas? Or should we trust in their judgement that it’s better to stay away?

Perhaps New Orleans — at least New Orleans grown beyond the high ground of the French Quarter and the Garden District — just isn’t meant to be.

Simon Winchester, author of a new book about the San Francisco earthquake of 1906 (“A Crack in the Edge of the World : America and the Great California Earthquake of 1906″ (Simon Winchester)), told the BBC this week that

… ancient countries are littered with the ruins of cities built where they ought not to have been built - Pompeii, Petra, Ayutthaya in Thailand, Heliopolis. …

But America is a country without any ruins. …

The country is young enough to have set down its cities wherever it pleases, without ever stopping to ask if the world agrees.

And the world does not always agree.

Which prompts me to wonder out loud whether - if one can imagine a map of America drawn up, say, two centuries from now - whether there may in fact be a litter of abandoned and ruined cities.

New Orleans, for example.

It is a little eccentric to create a city on a swamp, six metres below sea-level, between a river and a lake, in a part of the world afflicted by near-constant summer hurricanes. Might this not, one day, be abandoned to the elements?

The subhead of the Times article, while promoting the notion that the New Orleans recovery has somehow shifted course, perhaps unintentionally gets it right: “What Bush said would be one of the largest public reconstruction efforts ever is becoming a private affair, leaving the tough choices to residents as their risks increase.”

Isn’t that as it should be?

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Also writing about this: Asymmetrical Information, where Jane Galt posts “But the implied solution–government action–seems to me to hold at least as much potential for market failure. If the majority of people don’t want to move back to a crime-ridden and corrupt small city on a hurricane-prone flood plain, but the federal government goes ahead and rebuilds it anyway, it will have decreased the utility of those forced to move back, and wasted a stunning amount of taxpayer money on a suboptimal solution. I see no good way to distinguish whether the government or the market is more likely to produce suboptimal results, so my instinct is to default to the non-coercive system.” Some interesting comments too.

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Update 1: Tyler Cowen of super-blog Marginal Revolution kindly responded to our email about this issue and pointed us to Harvard economist Ed Glaeser’s essay “Should the Government Rebuild New Orleans, Or Just Give Residents Checks?” Glaeser argues for the latter (the checks in question being $75k - $200k), noting

New Orleans reached its peak of economic importance relative to the U.S. in 1840. …

For most students of urban distress, New Orleans was a problem, not an ideal. Poverty and continuing economic decline fed upon each other, delivering despair to many of the city’s residents.

New Orleans’ decline suggests that spending huge sums betting on the future of the city makes little sense.

Virginia Postrel’s Dynamist and Brad Delong’s Semi-Daily Journal posted on Glaeser’s piece. One of De Long’s commenter’s reminds us, a la Simon Winchester above, of Shelly’s Ozymandias.

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Update 2: Wizbang pointed us to the New Orleans Times-Picayune’s article today asserting that “Experts say the New Orleans flood of 2005 should join the space shuttle explosions and the sinking of the Titanic on history’s list of ill-fated disasters attributable to human mistakes.” If so, those responsible — including the Corps of Engineers, and, by extension, US taxpayers — owe the citizens of New Orleans for the difference between the damage caused by Katrina and the damage that should have happened if the levees were built properly. But the compensation should be in the form of vouchers that can be used to relocate and rebuild anywhere …

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Our incomplete Katrina coverage here.

Technorati Tags: Katrina, LA Times, LAT, Los Angeles Times, New Orleans

This entry was posted on Wednesday, December 7th, 2005 at 11:31 pm by A Senior Administration Official and is filed under Los Angeles Times, I knew I'd use my Econ major. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.