Setting Ourselves Up for Catastrophe

The Lincoln County Journal reports that a team of bureaucrats has descended upon Winfield, Mo., to assess and remedy the damage caused by the now-receding Mississippi flood waters:

The question of the day for the state and federal officials seemed to be how the government could help area farmers as the water begins to recede out of their crop fields.

If this is the question, the mistake has already been made. Disaster relief programs often come with nefarious long-term consequences. When government agencies bail out the victims of a disaster, we all feel good in the short term. It’s easy to see the repairs for the farmer’s damaged barn, for example. But, in the spirit of Bastiat, I have to point out what we can’t immediately see.

By consistently sending relief to disaster-prone areas, the government insulates them from some of the risk of living, working, and operating businesses there. This is essentially the same as a government subsidy for areas that are more likely to experience a disaster. As a result, there is more investment in and migration to these areas than there would be otherwise. Because this shifts people and businesses away from areas that experience relatively fewer disasters, the disaster-prone areas come to contain more stuff that can be damaged — and, thus, the average disaster causes more damage than it would have without the existence of government bailouts.

Paradoxically, disaster relief literally sets us up for catastrophe. Of course, once the catastrophe occurs, it leads to an increased demand for even more disaster relief, which, in turn, sets us up for even worse disasters, which … well, you get the idea. Very quickly, this turns into a rather vicious cycle. Let’s hope Missouri voters and politicians choose not to perpetuate the cycle.