"The Economics of Disaster", by Dr. Ron PaulSubmitted by Cyril on Sat, 02/23/2013 - 05:44
By Dr. Ron Paul:
"Hurricane Sandy was one of the worst natural disasters the east coast has ever seen. Clean-up and recovery will take months, if not years and estimates run in the tens of billions of dollars.
Shouldn't that tell us that it is a losing proposition to insure homes in coastal areas and flood plains often threatened by severe and destructive weather patterns? And if it’s a losing proposition, should taxpayers subsidize the inevitable losses arising from federal flood insurance?
The NFIP disguises the real cost of flood insurance in flood prone areas, which influences homebuilding and sales in such areas. Recklessly taking unwise risks when risk is underpriced is known as moral hazard. When politicians decide that private insurance premiums are too high, as with houses built in flood plains, the solution is to under price the risk through federal subsidies. The obvious and expected outcome is more danger to life and limb when disaster strikes.