Results for “water”

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Courtesy of Kevin Drum, read the whole thing.  Hindsight is easy, but what should FEMA be doing?

My view is the following.  Many levees are genuine public goods, and should receive government support, from the federal government (e.g., Army Corp; here is a brief history of their involvement) if need be although perhaps not ideally.  FEMA should not be in the business of flood insurance, nor should FEMA reimburse local governments for snow plowing.  Here is a Cato critique of FEMA.  Here is a libertarian article on why a limited governmental response to the Chicago fire was best.  Here is another libertarian critique.  Here is an AEI article that FEMA invests too much in earthquake safety.  Here is an argument that FEMA should not have been made part of the Department of Homeland Security.

Here is a recent piece on cuts to levee subsidies; the news will hurt the Republicans.  Here is a short piece on how revenue from airport privatization could have been used to shore up New Orleans levees.

Libertarian readers, do you care to argue the levee should not have been subsidized?  Do you favor real privatization, not as a Port Authority or Federal Reserve may be private, but in the true market sense?  (Here is a short history of the Louisiana levee authorities; their status has evolved over time.)  If you take that position, you have a few alternatives:

1. We rely too much on unreliable levees, and privatization/non-subsidization would reveal their true social costs and induce people to move elsewhere.

2. A privatized, non-subsidized levee would engage in a successful long-term contract with city residents; see the Demsetz-Williamson debate.  The government still would have to force residents to make the relevant tax payments, for free rider reasons.

3. A levee contract could be written without use of coercive taxation; see this piece on assurance contracts.

4. A private levee authority would invest in water safety out of fear of being sued.  Furthermore these ex post legal incentives would be reliable and would not involve more government intervention than ex ante regulatory incentives.

5. A private levee authority would be forced by its insurance company to build good protection and also hold huge capital reserves.  Their cost of capital and costs of production would remain lower than the government’s.  You can hold this position in conjunction with #3, or believe that coercive taxation would remain necessary.  But in any case it probably requires reliance on #4.

I am not willing to defend any of these five positions, but what do you say readers?  The current government system, obviously, does not have a sterling record.  Comments are open.

The core outlines of the New Zealand story are well-known: in 1980 the country was arguably the most socialized OECD country and stood on the verge of bankruptcy.  By the early 1990s New Zealand was one of the freest economies and had produced a solid if not spectacular economic performance.  The reforms included near free trade, substantial privatization, elimination of agricultural subsidies, free labor markets based on contract, free capital markets, 0-2 percent inflation as a formal regime, a relatively flat tax, and greater transparency in policymaking.  But the New Zealand economy has not seen major reforms in over a decade and in a few areas, such as labor markets, there has been backsliding.  Will reforms return?  I see a few hypotheses:

1. New Zealand reformed everything short of social welfare spending, education, and health care, which few voters wish or wished to reform.  In fact the point of previous reforms was to preserve (and perhaps extend) previous levels of social welfare spending.

2. Further reforms were thwarted by a move to proportional representation in the early 1990s, which gave minority parties undue influence and weakened threads of accountability.

3. Asset privatizations in particular were oversold — remember the Auckland blackout? — and New Zealanders lost their appetite for further changes.

4. New Zealand policymakers were well ahead of public attitudes, and managed so many reforms only because the country’s (previous) Parliamentary system had few checks and balances.  It is taking public opinion an entire generation to catch up to where policy stands.  Only then might current reforms continue.

5. New Zealanders can once again sit content, since they are no longer in danger of being blown out of the water by Australia.  If they start falling behind again, reforms will resume.

6. Donald Brash will be elected Prime Minister in September, and reforms will resume then.

I’ll give the greatest weight to #1 and #4, and say no to #6, comments are open, Kiwi commentators are especially welcome.